Preamble

The House met at Ten o'clock

PRAYERS

[Mr. SPEAKER in the Chair]

INVESTMENT GRANTS

10.5 a.m.

The President of the Board of Trade (Mr. Douglas Jay): With permission, Mr. Speaker, I should like to make a statement.
On 21st March I announced that payment of claims for investment grants for expenditure in the first quarter of 1966 would be brought forward three months, and begin on 1st April. Since that announcement the rate at which claims have come in has more than doubled, and already £26½ million of grants have been paid. Payment of the second quarter's claims will begin next month.
I am now able to announce a further measure of acceleration. On 1st July, the five Investment Grants Offices will be ready to receive claims for the whole of the second half of 1966—that is for a period of six months instead of three—and they will begin to pay these claims on 1st October. This will increase the cash flow to industry, and the fact that firms will be able to claim for two quarters on a single form will, I hope, save them some trouble. They will then be able to complete their applications for the whole of their 1966 investment. This may be particularly convenient for some smaller firms who may perhaps claim only once a year.
The average delay between investment and payment of grant will now be reduced to twelve months, as compared with 18 months under the old investment allowance system. I believe that these two instalments of speeding up should reinforce the incentive to increased investment provided by the temporary increase in the rates of grant to 25 per cent. generally, and 45 per cent. in development areas, for expenditure in 1967 and 1968 which I announced in December.
These accelerations will mean additional expenditure in the current year and

the necessary supplementary provision is being sought.

Sir K. Joseph: Although we have reservations about the Government's major changes in this system, will the right hon. Gentleman accept that we welcome these improvements? However, since the estimates of the increased expenditure to which he referred involve a judgment about what expenditure will be undertaken by industry this year, what is his expectation now of the difference in level between private manufacturing investment during 1967 and that of 1966?

Mr. Jay: The actual figures which we have available for the first quarter show that the fall was a good deal less than some of the forecasts had suggested. We have conducted a further survey and we shall be publishing shortly an additional forecast, and I had better not anticipate that.

Mr. Cant: Is this acceleration in the payment of grants an aspect of general reflationary policy this year?

Mr. Jay: Yes, Sir, in a sense it is. It is as a result of our having speeded up this organisation and of the staff having worked very hard and efficiently, that we were able to do this, but, of course, it is necessary to do it and the decision to do it is certainly intended to accelerate investment by industry.

Earl of Dalkeith: Is the right hon. Gentleman aware that some of us are very disappointed that he has not taken this opportunity to announce that Edinburgh and Leith will be included in the development areas, since the differences which he has announced today in the rate of repayment will accentuate the slow and steady strangulation of Edinburgh? Will he reconsider this in the light of the increasing number of representations which are being made to him?

Mr. Jay: This acceleration applies to Edinburgh as well as to everybody else.

Mr. Wylie: Does the right hon. Gentleman not realise that Edinburgh is the only part of the whole of Scotland excluded from the advantages of development area status and that this is becoming increasingly serious for business there?

Mr. Jay: Yes, but the greater part of the country is so excluded. Only a relatively small and needy part is included in the areas and a great number of places could argue that they are excluded.

Mr. Edward M. Taylor: Has the right hon. Gentleman closed his mind to removing the obvious anomalies in Scotland, for example, on the question of plant hire on building construction, and would he not consider including Leith, with its vital port development?

Mr. Jay: All these questions relate to the detailed administration of the grant and do not apply to my announcement, which was about acceleration of the payments, which apply everywhere to all sorts of expenditure which receive the grants.

BUILDING RESEARCH STATION

10.10 a.m.

The Minister of Public Building and Works (Mr. R. E. Prentice): With your permission, Mr. Speaker, I would like to make a statement.
On April 20th my right hon. Friend the Prime Minister announced that responsibility for the Building Research Station would be transferred to me on July 1st. I have been considering the arrangements needed, both to maintain the scientific integrity of the station's work and its close links with the building industry and to enable research and development related to the industry to be co-ordinated.
We are all concerned to improve the quality and efficiency of building, to get the best value for money and to develop techniques of design, management and construction. Prospects of doing this depend on increasing the amount of research, and of getting a closer and more effective link between research, development and production. We therefore require arrangements which will take account not only of the work of the Building Research Station itself, but of other research into construction, and of the role of my Ministry in promoting research and carrying out development work.
With a view to encouraging more research into construction and to improving the co-ordination between the work

of the station and of other agencies engaged in research, I propose to set up a Construction Research Advisory Council. This Council will report to me. Its terms of reference will be:
To survey the national need for construction research, to review existing facilities, to consider measures necessary to encourage the expansion and more effective deployment of available resources and to advise on the dissemination of research results.
I shall appoint members drawn from both sides of the industry, the appropriate professions, Government Departments, the universities and others concerned in building research. I hope that the new Construction Industry Research and Information Association will be represented. The Chairman will be Sir Antony Part, the Permanent Secretary of my Department.
Programmes of work for B.R.S. will need to be framed in the general context of policies endorsed by the Advisory Council. There will also be, as at present, a Steering Committee for the station. This Committee will include representatives of other Government Departments with major building responsibilities and an increased number of independent members. The Committee will have an independent chairman.
Executive control of the station will remain in the hands of its Director. He will answer for the overall running of the station to the Permanent Secretary who will, however, delegate his responsibility for finance, administration and contractual matters to the appropriate branches of Ministry headquarters. The Directorate of Research and Information at the Ministry, working under the general guidance of the Director General of Research and Development, will be the main centre for the formulation of Government policy on scientific research for the construction industry.
The station now works not only on materials and structures, but on constructional economics, operative skills, user requirements and urban planning. I agree with this broadening of its scope and shall seek to encourage it.
I am anxious to dispel the doubts which have been expressed in some quarters about a possible threat to the scientific integrity of the station under the new arrangements. The station will maintain —and, I hope, enhance—its status as a


research establishment. There is no intention of interfering with its detailed day-to-day working, or of curtailing its accustomed freedom to publish the results of its scientific work. It will be encouraged to preserve its existing contacts with the industry and its own structure of specialist committees by which relationships with outside interests are developed.
I hope that the new arrangements will enable the station to play an even more effective part in construction research than it has done in the past.

Mr. Chichester-Clark: I will, of course, wish to study more closely the right hon. Gentleman's announcement. Is he aware that, for some time, we have wanted the strands of so many research organisations drawn more closely together? What is the relation, financial or otherwise, between C.I.R.I.A. and the Government? Is it unaltered? We welcome any assurances about the independence of the B.R.S., but it seems that the right hon. Gentleman has not gone far enough in that direction.
For instance, what criteria covered his decision to appoint an independent chairman for the Steering Committee of the B.R.S. and a distinguished civil servant for the Advisory Council? What proposals, if any, are there for the future to link the work of the Agrement Board with some of these other organisations? Should we not be trying to cut down on boards and committees generally?

Mr. Prentice: I thank the hon. Gentleman for his general expression of good will. C.I.R.I.A. has only just been formed and is an organisation of the construction industry itself. The Government are represented on it, but it is not a Government organisation. It will, of course, get financial grants from the Government on a £ for £ basis for research and, for the time being, on a £2 for £1 basis for information. I hope that it will grow and that the industry will give it maximum support.
The hon. Gentleman asked why I had decided on an independent chairman for the Steering Committee of B.R.S. and a civil servant for the Advisory Committee. We had to weigh both decisions in the balance of advantage. The Advisory Council will report to me, and I

thought that the appointment of the Permanent Secretary of my Ministry as chairman ought to be seen as an example that we were very keen that the Ministry, at top level, should be concerned in research and the formation of research policies. As I said, its membership will be widely drawn.
On the Steering Committee for B.R.S., we are planning a committee of a chairman and 10 members which will be slightly larger than the old committee, which will mean that other Government Departments with building interests will be represented. For that reason, I wanted to achieve a balance by having more independent members, and the appointment of an independent chairman might give some extra assurance that the B.R.S. would have the right kind of technical assistance. The Agrement Board uses the facilities of B.R.S., and this will continue.

Mr. Hilton: I think that we will all be encouraged by my right hon. Friend's statement. In his examination leading up to this announcement, did he gain any impression of the research facilities sponsored by private interests in the industry? How widespread are they and to what extent does he think that they will fit in with these new arrangements?

Mr. Prentice: I am grateful for my hon. Friend's view, particularly in view of his wide experience in the industry. On research sponsored by firms, there is, of course, a certain amount going on and some very good work is being done, but the total is almost certainly inadequate. The amount of research in construction is about 0·4 per cent. of the total output of the industry, as against 2·6 per cent. in industry generally. This is not quite a fair comparison, because related research takes place in the construction material industries, but nevertheless the amount is too small. I hope that the new arrangements will stimulate more research by the industry and organise it more to help itself, in addition to the help which it gets from the Government in this respect.

Mr. Costain: As the Minister has got back into his Department a brainchild of his own making, will he arrange for flags to be flown on 1st July to show this victory? Will he also consider the


fact that the efficiency of the industry is very much affected by stop-go types of policy on the part of its clients, including Government Departments, which results in getting a surplus and a shortage of material at the same time? Will the research organisation have the necessary powers to investigate these matters, including the Treasury's attitude towards the building industry?

Mr. Prentice: The hon. Gentleman is asking me to go somewhat wider than the terms of reference would indicate. As to stop-go, this industry, along with others, obviously could not escape the effects of the economic measures introduced last July. I am making no apology for those measures. It is worth noting that, taking 1966 as a whole, the output of the industry has been about the same as, or marginally higher than, that in 1965. It is not true to say that an undue burden has been placed on the industry.

Mr. Urwin: I welcome my right hon. Friend's statement, which will be widely appreciated by the industry. Will he assure the House that there will be no overlap between the B.R.S. and the existing research establishment in his Department? Will they operate separately or become a single entity?

Mr. Prentice: There has been some comment in the technical Press about this, and I think that much of it has been based on a misunderstanding of the situation. The Directorate General of Research and Development in my Ministry does not do scientific research itself, but stimulates research, gives guidance and co-ordination to research that is going on elsewhere and places some research contracts with universities and others. This side of our work will continue and we have plans for it to grow. The emphasis is on development work and applying the results to our building programmes. This will continue and it will in no way overlap.

Mr. Boyd-Carpenter: Under the new arrangement, who will be the accounting person for the expenditure of the B.R.S.?

Mr. Prentice: The Permanent Secretary to the Ministry of Public Building and Works.

Mr. Channon: Without being thought to be carping, would the right hon. Gentleman say how many committees are now working in this field of operation? Would it not have been better to have had a committee to organise research rather than to survey the national need for research? Will this new body be able to carry out research into, say, the development of building materials to help our export trade?

Mr. Prentice: I am sympathetic with any view that there may be too many committees nowadays. However, research into the construction industry is bound to be carried on at a number of different places—by firms themselves, through the industry's own Research and Information Association, by universities, the B.R.S., and so on. This means having a number of committees, and this is inevitable. It is right, for the reasons I have given, that we should have an Advisory Council for research as a whole; to survey the whole field of activity, to co-ordinate it, identify research needs, consider future priorities, and so on. The Advisory Council will certainly be able to look into the question of research, including building materials, if it thinks fit.

Mr. Robert Cooke: Now that the station is to come under the right hon. Gentleman's eminently civilised Department, will it be giving its attention to the better use and conversion of older buildings and will the Advisory Council contain people who are skilled in this art?

Mr. Prentice: Although I have announced the chairmanship of the Council, I have not made any decisions about the whole membership of it. Certainly, we want people who have broad experience of the industry, and they will have to advise on the needs for research in the construction industry. I would not at present try to specify the problems which they may think will require priority.

NATIONAL INSURANCE ACT 1965 (AMENDMENT)

10.22 a.m.

Mr. Gwilym Roberts: I beg to move,
That leave be given to bring in a Bill to amend the National Insurance Act 1965 by reducing the pensionable age for men to sixty.
The provisions of my proposed Bill are simple, and I can state them briefly. They reduce the pensionable age for men to 60. This would mean that a man could either retire at this age, on pension, or, if he wished, could obtain additions to his pension by going on working until he eventually retired.
I shall remain true to my racialist and religious background by developing my case under three heads. The first is to point out the anomaly which at present exists between men and women. Women already qualify for pension at 60, although from 1925 to 1940 both sexes obtained a pension at the same age. It is rather surprising that pensions should be given to women earlier than to men when one considers the devastating fact that at 60 the life expectancy of a woman is about four years in excess of that for a man.
The pensionable age for men is 60 in many countries. Without going into a great deal of detail, I will merely say that in France, Italy, Hungary, Japan, Turkey and the Soviet Union the pensionable age is 60, while in Yugoslavia it is only 55. In many of these countries the qualifying age for men is the same as for women. But that is only the first of my arguments.
The second is that if we believe in technical change—in a computer revolution—the whole aim of a change of the type I propose is to make life easier for our fellow human beings; in other words, to make their working week and working lives a little shorter Our aim in the long-term, if not in the short-term, should be towards earlier retirement. It can be argued that in the short-term this is not an easy object to achieve and that at present people are tending to work well beyond the age of 60, and even beyond 65. Nevertheless, changes in this pattern will have to be made; and I will develop this theme on 26th June when I will put a Parliamentary Question to the Minister of

Social Security asking her to allow men to continue working after the present pensionable age and still draw their full pension. This Measure does not force men to retire at 60. It merely gives them the alternative of doing so.
My third argument is a humanitarian one. It is that there is already great need for a Measure of this kind. The figures show that a great many people are being forced to retire between the ages of 60 and 65. The Census of 1961 showed that of people already retired, 128,000 were under 65 while only 41,000 were under 60. This means that about 80,000 were compelled to retire between the ages of 60 and 65. I have received many hundreds of letters from people who have been forced to retire due to ill-health when aged about 60. It is often cynically suggested nowadays that young people think only of themselves. I assure the House that many of them have written to me asking for this alteration to be made on behalf of the elderly.
At Mosley Colliery, workers were offered early retirement. They could retire at 60, and it was found that the great majority of them, as long as they knew that they would have ample or substantial provision made for their later years, chose to retire at the earlier age.
The only argument that can possibly be made against my proposal is on the grounds of cost. If the Minister does not feel inclined to implement the whole of my Bill, I hope that she will agree to cater urgently for those who are obliged to retire at the age of 60 because of ill-health or people who are forced to go on working and, by so doing, make an early grave for themselves. When considering the question of cost one must consider whether there should be a limit on expenditure on the social services. In some cases there must obviously be a physical limit, such as for education, where one is limited by the number of schools and teachers available. Similarly with the medical services. However, in this case the only limit is that of political intent. It has often been said that if we can spend £2,000 million on arms we can afford anything. Many of my hon. Friends would suggest that the money we spend on Polaris should be used for other purposes.
From the point of view of the social services, our national problem is not a


shortage of resources but the redeployment of the resources we have in the interests of social welfare. It is in this spirit that I introduce my Motion.

Question put and agreed to.

Bill ordered to be brought in by Mr. Gwilym Roberts.

NATIONAL INSURANCE ACT 1965 (AMENDMENT)

Bill to amend the National Insurance Act 1965 by reducing the pensionable age for men to sixty, presented accordingly and read the First time; to be read a Second time upon Friday and to be printed. [Bill 275.]

Orders of the Day — BERMUDA CONSTITUTION BILL

Order for Second Reading read.

10.30 a.m.

The Secretary of State for Commonwealth Affairs (Mr. Herbert Bowden): I have it in Command from the Queen to acquaint the House that Her Majesty, having been informed of the purport of the Bill, has consented to place her prerogative and interest, so far as they are affected by the Bill, at the disposal of Parliament for the purposes of the Bill.

The Minister of State for Commonwealth Affairs (Mrs. Judith Hart): I beg to move, That the Bill be now read a Second time.
The object of this very short but important Bill is to enable a new Constitution to be established for Bermuda in a convenient and comprehensive form. The present Constitution is, frankly, archaic. It resembles, on the whole, those of the North American Colonies before the War of Independence. Indeed, some of its features date back to that period and before. They date back to the early part of the seventeenth century. The Bermuda Parliament is justifiably very proud of its position as the oldest Parliament in the Commonwealth outside the British Isles.
There have been changes over the years. Some of these have been achieved by Instruments issued under the Royal Prerogative, some by Acts of the local Legislature, and others by unwritten constitutional convention. As a result, Bermuda now has a very complicated Constitution. It is not contained in any single comprehensive document and it is one in which the written provisions may give a misleading impression of the real situation.
To give an example of this, under the present Constitution the Governor is assisted in the exercise of his executive functions by an Executive Council whose advice he need not follow, and Government Departments are controlled either directly by the Governor or by statutory boards. Members of the Executive Council and of the statutory boards are appointed by the Governor and are not


responsible to the Legislature. Thus, in theory, the Government's executive powers are virtually unlimited and the elected House of the Legislature has no say in executive government. That is the Position as it would seem to be.
However, because the Legislature is supreme in the field of legislation, and because all expenditure needs the approval of the elected House of Assembly, effective government depends on co-operation between the Executive headed by the Governor and the Legislature In practice, members of the House of Assembly play a very prominent part both in Executive Council and in the Government boards. Therefore, in effect Bermuda enjoys, and has long enjoyed, a wide measure of internal self-government.
As regards the Legislature, the nine ancient parishes of Bermuda, ever since the early days of the settlement of the Islands, have each returned four members to the House of Assembly. Before 1963, the franchise was based entirely on property, and property owners could vote in every parish in which they owned land. In 1963, for the elections at which the present House was elected, the franchise was extended to all those over 25 and property owners were restricted to a single additional vote. Early in 1966—three years later—the additional vote was abolished and the voting age was reduced to 21. So, within three years, there was completed a transition in the electoral arrangements which, in the United Kingdom, took well over a century to achieve.
Since these changes in the franchise, there have been two developments which I should draw to the attention of the House. First, at the Constitutional Conference held in London last November, my right hon. Friend the Chancellor of the Duchy of Lancaster offered to send to Bermuda an expert who could look at and make recommendations for the improvement of their system of electoral representation. The Bermuda Government gladly accepted the offer and the visit was made last March. I believe that the Report which was submitted by the expert to the Government of Bermuda will be of immense value to them.
The second development follows the decision of the Constitutional Conference on the establishment of a Boundaries

Commission. The conference decided that the Commission should be presided over by an eminent person from outside Bermuda with knowledge of, but no vested interest in, Bermuda. The second member of the Commission was to be a person who held, or had held, high judicial office in any part of the Commonwealth. The three other members were to be members of the Legislature, appointed by the Governor, two on the advice of the leaders of the largest party in the House of Assembly and one on the advice of the leader of the second largest party.
Sir Newnham Worley, formerly Chief Justice of Bermuda, accepted the Government of Bermuda's invitation to preside over the Commission, and I should like to take this opportunity of thanking Sir Newnham for so public-spiritedly coming out of his well earned retirement to carry out this important task. Sir Donald Jackson, formerly Judge of the Caribbean Court of Appeal, accepted the Government of Bermuda's invitation to be the other "outside" member, and our thanks are due to him also for the valuable services he rendered.
The Commission began its work in April and its Report has, I understand, keen adopted by the House of Assembly in Bermuda.
From this very brief account of the changes which have occurred over the last several years, the House will appreciate that, while the Constitution retains some ancient features, there has been no lack of progress, particularly in recent times. Nevertheless, and however well this ancient Constitution has worked in the past, the time has now come for the introduction of a new Constitution which provides clearly and unambiguously for the responsible Government which all bodies of opinion in Bermuda say they wish to have.
At the Constitutional Conference held last November, the form of such a Constitution was decided and at the same time it was agreed that the best course would be to embody its provisions in an Order in Council. Since Her Majesty's existing powers of legislating for Bermuda are very limited, the Bill now before the House is necessary to empower Her to make such an Order in Council. If and when the Bill is passed, a draft Order embodying a constitution on the lines


decided at the conference will be submitted to Her Majesty in Council. It will follow the full outline given in Appendix A to the Conference Report, of which the House has had copies.
I need not trouble the House with a detailed description of the provisions to be included in the Order in Council, since they are set out in the Report, but, in brief, while the Governor will retain responsibility for external affairs, defence, internal security and the police, on all other matters he will normally be bound to act in accordance with the advice of the Executive Council—the old title is to be retained to describe what in effect will be the new Cabinet. That body will in future consist of members of the Legislature appointed on the advice of the member of the House of Assembly best able to command the confidence of a majority of his fellow members. Provision will also be made to safeguard fundamental rights and freedoms of the individual and to ensure the independence of the judiciary and the public service. In short, the new Constitution will provide for a modern form of Government with a Government leader and Executive Council responsible to the elected Legislature.
In fairness I should make it clear that, as is not unusual on such occasions, there were differences of view between various groups of delegates at the conference where all shades of opinion in the Bermuda Legislature were represented. Indeed, in addition to the majority report endorsing the proposed Constitution, the report of the conference contains two minority reports, one arguing that the constitutional decisions go too far and the other that they do not go far enough. This indicates the difficulties which were presented by the conference. In fact, the decisions eventually reached were in the form of a compromise and were accepted by a majority of delegates on this basis —that is, as the best compromise which could be reached and agreed.
A number of my colleagues on both sides of the House have visited Bermuda in comparatively recent times. They will agree with me, I am sure, when I say that my impression, when I visited it just before Easter this year, was of an island which is very small in area, which is very beautiful, and which is compara-

tively prosperous in terms of Caribbean life. It has one of the highest standards of living in the world, and the prosperity extends throughout the community.
I should like to give the House some facts and figures. There are two television stations and four radio programmes —and this in a territory with a total population of under 50,000. Ninety-six per cent. of all households have a refrigerator, 82 per cent. have radio and 66 per cent. have television. It is, perhaps, not surprising that the people of Bermuda, possessing so many of the material things of the modern age, have been cautious in their approach to constitutional change.
During my visit I met many people. I met representatives, I think, of all the major political groupings in Bermuda. I was impressed by the attitude of all, whatever their political views, to the problem of colour. Indeed, whether they wanted to go more slowly or more rapidly, they were all concerned that Bermuda should not be dogged by colour prejudice, should not be haunted by the problems of colour that have arisen in so many other parts of the world.
I should also mention what I said in public in Bermuda about the Constitution —really as a comment on the disagreements that there had been about the pace of progress as represented by the constitutional proposals because, of course, members of one or two groups out there had represented to me that they wished that the Constitution would go further. What I said to them, and I quote now from the Royal Gazette of Saturday, 18th March of this year, was:
Any Constitution is an interim Constitution. I think that you must regard constitutional development as a steady process. Bermuda's new constitution is a very big advance on the previous one. It will be a good thing if people are interested enough to discuss how it will evolve further. If there is a demand for further change, then further change will no doubt occur.
Frankly, I do not think that one could put the position more fairly.
The Bill now before us will enable the new Constitution to be introduced. It gets rid of many of the archaic features of the old Constitution. It embodies a number of very important steps forward. But of course, even in our own society our though we do not have it by Order in Constitution is continually evolving—al-


Council or by a Bill going through the House of Commons—and I think that it is quite clear that in the situation in Bermuda there will be people who will wish to put forward ideas for further evolution of the Constitution.
These we shall be ready for, and shall be glad to listen to representations when there has been experience of this constitution and if and when new proposals are put to us.

10.43 a.m.

Sir Frederic Bennett: I was very glad that the Minister of State mentioned, as is the fact, that of all the territories within the Commonwealth, Bermuda has been visited as much as any by very substantial numbers of hon. Members on both sides of the House, not only in their personal capacities but in attending the very many international conferences that have been held there.
If I can claim nothing else, I can perhaps claim an even closer association with Bermuda than anyone else here, because I bought a cottage there about 15 years ago and have been a very frequent visitor. In fact, I am one of the casualties along the road of democratic advance, in that I have lost a vote which I used to possess because of my ownership of the cottage, although in view of what has just been said I must add that I never exercised that vote.
Speaking on another personal note, I was on one occasion asked to stand as a Member of Parliament for a constituency out there. When I add proudly that it included one of the most racially integrated elements, that in St. David's Island, and does not consist only of one race, hon. Members will understand that it was with great reluctance that I felt bound to refuse in that my electors in Torbay might well not greatly appreciate my taking such a step, of divided loyalties.
It is no part of the Opposition today to accept responsibility—nor would we be asked to—for the detailed results of the conference, but studying the results of that conference I think that, on the whole, one can say that this Bill is a very logical, natural and creditable step forward along the road to self-government for this very small territory.
I add, because this has been a difficult matter to deal with and one should pay

tribute to all for having achieved this compromise, that in some other territories larger in population and area the process has been simpler because the normal advances in self-government have been much more of a reality than we know in our hearts is necessary or feasible in Bermuda, with its small area and a total population of under 50,000. Those facts have made the task much more difficult than has been the case in the steady advance we have been able to make towards self-government, and eventual complete independence, elsewhere in the Commonwealth.
The hon. Lady spoke of Bermuda's economic conditions representing very much a special case. To a large extent this reflects very seriously on the sort of political future which the island has. I did not think that she was quite generous enough when she said that Bermuda had a very excellent standard of living in comparison with the Caribbean generally, although she added, as I do, that the standard of living compared favourably even with that of the island's giant United States and Canadian partners, and with our own.
One has only to go to Bermuda and then travel to the southerly Caribbean territories—with the exception of the Bahamas, which even so is not so economically advanced as Bermuda—to appreciate that Bermuda is much better off than those southern areas; that in Bermuda, cutting across all questions of race, there is exceptional economic prosperity. We in this House would be very foolish if we were to encourage any steps that would damage such a notable achievement—

Mr. James Johnson: Would the hon. Gentleman confirm that there is no poverty in Bermuda, as is stated in the Amendment to Motion 273, to which he has put his name, in today's Order Paper? It sounds a little sweeping to me to say that there is no poverty at all.

Sir F. Bennett: I have not said that there is no poverty at all. I have never said that there is no poverty in this country, or in the United States. I have said, endorsing the Minister's remarks, that the standard of prosperity compares favourably with that in this country, in Canada or in the United States of


America and is a great deal better than it is anywhere else in the Caribbean area.
What we have to consider is the basis of this widely spread prosperity. It is based on two features, and two alone, because Bermuda as a result of her size and for other reasons has virtually no natural resources. The first feature that sustains the island's prosperity is the chance historic one of the presence of an American base and the enormous spending power that that has engendered throughout the island. That has enabled Bermuda to develop an almost North American standard of living. But in thinking of this American base, and what it means in terms of highly-paid employment for all races at the base, and in work associated with it, we have to remember world strategic and military conditions alter, and although there is no sign yet of the U.S.A. cancelling or wishing to give up its base facilities in Bermuda, those facilities have been reduced.
As we in this House know when we have discussed parts of the Commonwealth with a view to reducing our military commitments, such changes can lead to economic disturbances such as have taken place in Malta. It is altogether wrong to encourage Bermuda to believe that she may always have the opportunity to rest a large part of her prosperity on the continuance of the American base.
We have, therefore, to turn to the other source of income and capital growth for Bermuda, which is tourism. I am sure that I carry the House with me when I say that, in the world today, quite apart from the climate with which Bermuda is blessed, there is one feature above all which encourages tourism, that is, political, social and racial tranquillity. Without that, the tourists simply do not come, and, to put it bluntly, if they do not come to Bermuda, she will suffer a steep decline in her standard of life, which could be quite horrifying.
Having known Bermuda for many years, I must say that there have, in recent years, been regrettable signs of a slight entry of racial tension, signs which hitherto were, fortunately, notable for their absence. I have tried to determine what the causes of this development are. As the hon. Lady said, they are not to be found in the realm of

holding back political or economic advance, because progress in both these directions has been marked. We have seen, for example, how the old-fashioned property vote developed within a short time into an overall franchise.
In my view, certain aspects of what has been happening in Bermuda are a reflection of the race troubles in the United States. American newspapers are distributed much more frequently than English ones in Bermuda, and, naturally, descriptions of race rioting and so on in the United States have had an unhappy impact upon an island so closely associated in both geography and tourism with the United States.
Apart from that—I do not want to spend too much time on the point—there have been certain other external rather mischievous elements entering the Bermuda political arena, elements which in the past have not been closely associated with the development of true democracy elsewhere in the Commonwealth. Unfortunately, they have reared their heads in Bermuda.

Mr. Marcus Lipton: Who are they?

Sir F. Bennett: I have referred to external forces of the sort I have described, and I shall content myself with that observation. The House can form its own conclusion.
The Minister very fairly pointed out that, although the outcome of the conference had substantial majority support, there were strong minority opinions expressed, particularly by members of the Progressive Labour Party. It is only fair to say a word about their objections now. Some of them, I think, have lost some of the force which was felt at the time when the Report of the conference was issued.
In paragraph 3 of the P.L.P. minority Report, strong objection is expressed to the Constitution as a whole because it was felt that it compared very closely with the Bahamas Constitution and, at the time when the findings of the conference were prepared, the P.L.P. members felt that Bermuda would be unlikely to be able to secure the sort of political advance which they wanted within a Bahamas-type Constitution. I think that that is a fair interpretation of their view.


In fact, the Bahamas has since then, under a Constitution not greatly dissimilar, seen a remarkable political change in Parliament and Government, so that it cannot now be said that the Constitution proposed for Bermuda will stand in the way of any one party achieving power in Bermuda any more than it has in the Bahamas.
There was strong criticism on the question of taxation. On this point, one must always bear in mind that, in dealing with the economy of a country which has no natural resources but which depends almost entirely on tourism and what is allied with tourism—it being an international tax haven—one cannot apply the rules of taxation which are relevant in a modem industrial society with its own resources. One must be very careful not to damage, for the sake of a political theory, a structure which is of great value to the island. It would be very hard to recover from such damage because there are so many other places in the sun which are all too ready nowadays to take over Bermuda's position in this respect.
There has been criticism also of the three years' residence rule which will allow non-Bermudans to vote in future. Again, I regard this as shortsighted. If the island is to continue to prosper, more people must go to it, taking their ability to develop its potential and to help in local employment, apart from seasonal tourism. It would be selfish to think that in Bermuda—we do not do it vis-à-vis our other Commonwealth partners—we should prevent non-Bermudans having a vote if they decide to live in the country under its laws.
Another question in that context is raised by the objection to the retention of boards. I hope that I carry the hon. Lady with me when I say that, although we in this country have tended, naturally and strongly, because of our traditions, to favour the departure of such boards and to feel that ordinary Government Ministries should take over their rôle—sometimes, nowadays, we do not seem to be following this precept in Britain as we should—when there is a population of only 50,000, including men, women and children, to be taken into account, there is, inevitably, a limit to the number of people of skill in govern-

ment who can devote their whole time to the work of government.
In my view, it would be likely to harm development if we excluded entirely those who can help in governing the island only on a part-time basis. In saying that, I have very much in mind what we do in this country when dealing with a population of only 50,000 or so. We do not insist on a form of ministerial government in such circumstances, precluding everyone who can help only on a part-time basis.
Now, the question of constituencies. When one looks at them carefully, one sees that the objections apply only to the large constituency of Pembroke, which will in future have double the number of members of the other parishes. On a strict proportional basis. obviously it should have rather more, but I do not believe that it is worth upsetting a Constitution because of a question which would, after all is said and done, give two more members for one parish if the P.L.P. had its way and a strictly mathematical basis were adopted.
I took the average of all the other parishes and I found that, apart from Pembroke, they will have about 530 constituents on average per member, and Pembroke will have about 1,100, a little over double. That may be unjustifiable in strict mathematical terms, but one must recognise that there are quite wide electoral discrepancies of population in other parts of the world, and even in this country. I believe that my own constituency of Torquay has nearly double the number of constituents of Montgomery, yet I have not so far decided to go to the stake in order to make quite sure that there is a fair proportion as between one constituency and the other.

Mr. Christopher Rowland: Does not the hon. Gentleman agree that the anomalies which occur in the British electoral system (a) are in time put right, and (b) tend to cancel one another out as between the parties, whereas in Bermuda neither of these factors seems to operate?

Sir F. Bennett: I think that the hon. Lady gave the answer to that question in advance by saying that no constitutions are entirely static. They are in the process of being put right. They


have already been put right 50 per cent. of the way at the conference she attended, as compared with the situation before, when the number of members for Pembroke was doubled. Therefore, the constitution is on the way to being remedied.
I do not think that we do any service by stressing racial differences in Bermuda. If we do, we shall perhaps get a certain amount of self-satisfaction, but we shall do a great deal of damage to the economic structure in Bermuda which is dependent for a large degree of success on the lack of racial tension.
Finally, I wish to say a word about independence, which people in Bermuda did not mention much at the Conference. But it was mentioned in a letter written to The Times afterwards by the leader of the P.L.P. Any territory must, in due course, decide which way it shall go, but there seems to be a practical limit to what can form an independent sovereign country in this day and age as regards the numbers involved. I do not accept for a moment that our granting independence to Bermuda, with its total dependence on outside resources concerning tourism, and so on, and the presence of the American base, would make independence in any way a reality when we talk in terms of sovereign countries elsewhere with substantial populations.
The hon. Lady concluded by saying that this was not the end of the road. We on this side of the House agree with that, but we think that it is a marked step forward. From now on all our efforts should be concentrated on making the constitution work. Such tensions and suspicions as have arisen within Bermuda can best be overcome and disproved, as has been shown elsewhere in the Commonwealth, by the two races working even more closely together in the future than they have in the past.
It is worth mentioning that, unlike parties in other parts of the Commonwealth, the U.B.P. in Bermuda has a substantial number of people of races other than Europeans in its membership. I believe that if they were here today they would endorse every word I have said, in that the path forward in Bermuda is not by making comparisons on strictly racial lines, but by trying to get the

races working together. The ratio of numbers between the races is not even two to one, leaving out the tourists and the base personnel. There is no other part of the Commonwealth where the discrepancy between the two races is so small, and it is essential that they work together and not apart because Bermuda, if they are working apart, is nothing at all.
Therefore, I have no hesitation—and I believe that I can also say this on behalf of my right hon. and hon. Friends —in endorsing the Bill and the Order in Council which is to flow from it, and I wish the people of Bermuda well and hope that they will work in amity.

11.4 a.m.

Mr. Tom Driberg: All of us in the House have a high regard for all the people of Bermuda, whatever their racial background. Some of us wish that they all had equal rights. The hon. Member for Torquay (Sir F. Bennett) appears not to wish that, judging from what he says. He says that we should not stress any racial inequalities. But it is impossible not to draw attention to them when they are felt as keenly as they are by the coloured people of Bermuda who, after all, despite what has been said about the very small difference in numbers, are a majority who succeed in obtaining only a minority of seats in the House of Assembly because of the way in which the constituency boundaries have been managed.
I do not know in this connection what the hon. Gentleman meant when he said that we should not take any step which could damage the economy of Bermuda —I am trying to paraphrase him fairly, presumably by keeping away either tourists or the base personnel, or something like that. But surely he is not suggesting that American tourists would refrain from going to a beautiful island for their holidays if it had a coloured Government, or anything like that?

Sir F. Bennett: The hon. Gentleman misquoted me once at the beginning of his speech and I decided to let it go. But I must emphasise that I did not say that. I said that American and other tourists would not go if there were a state of non-tranquillity in political and racial terms on the island. That is, in effect, what has happened disastrously for other economies in the world.

Mr. Driberg: I entirely accept that. I said that I was paraphrasing the hon. Gentleman. He says "non-tranquillity". Presumably he means riots and disturbances, but who is going to start them? Presumably if this Constitution went a bit further and gave real justice—what the hon. Gentleman called, perhaps ironically, "true democracy"—to the people of Bermuda, he means that the dominant white oligarchy would resort to violence to prevent the coloured people from getting their rights and a just constitution. Is that what he means? If so, it does not say much for their sense of true democracy.

Sir F. Bennett: I do not want to weary the House by constantly answering these rhetorical questions. I am content to let my speech rest on the record.

Mr. Driberg: I think that the hon. Gentleman is right, and HANSARD will show tomorrow exactly what he said. But I wanted to draw out some of the implications of what he said, because they seem to me to be a little dangerous.
In introducing the Bill my hon. Friend explained that the Bill says practically nothing, as is evident to the House. There is nothing of substance in it about the Constitution. I should like to ask her whether the Order in Council embodying the Constitution will be debatable when we see it. Although she assured us, I am certain in good faith, that the summary of the provisions of the proposed Constitution represents roughly what will be in the Order in Council, there may be second thoughts. Changes may be made, and we should like to see the actual terms of the Constitution before we decide to support it. If she replies by leave of the House, perhaps she will answer that point.
I am not quite sure that I accept the way in which both my hon. Friend and the hon. Gentleman seemed to equate the two minority Reports. My hon. Friend said that there was one minority Report which said that the Constitution goes too far and another from the Progressive Labour Party which says that it does not go far enough. Of course, I suppose that the first minority Report, the one which says that it goes too far, must come from a relatively small minority of the dominant race, whereas the other comes from the P.L.P., which represents a much

larger proportion of the population of Bermuda. It is not altogether fair to seem to equate those two minority Reports. The conference was dominated by people from the majority party elected on the old unjust boundaries.
There are three important aspects of the report. First, there is the question of the registration of electors. My hon. Friend has referred to that. A promise was made to send an expert. The P.L.P hoped that something on the lines of the custom in this country of registering electors would be adopted. It was promised that an expert on such matters would be sent, and an expert was sent. I am sure that he did his best and gave the best advice that he could.
But the expert who was sent was an expert from the Colonial Office accustomed to advising the peoples of—perhaps through no fault of their own— semi-literate developing countries on constitutions and so on. Surely an expert should have been sent from the Registrar-General's Office, since it was desired that the system adopted there should be something like our system here. I gather that he has reported but his report is not as yet available. I believe that it has not been published in Bermuda either. If I am wrong, perhaps my hon. Friend will correct me.
The second most important aspect of the Report is the promise of consultations to widen the basis of candidature. At present—and this is a most extraordinary aspect of the undemocratic system in Bermuda—all public servants are debarred from standing for the House of Assembly. This is extremely unfair because it means that some of the most educated and articulate people are debarred from standing—school teachers, for instance—because so many people are public servants in Bermuda, as the hon. Gentleman no doubt knows.
If one looks at paragraph 15 in the Report of the conference, one sees that
The Conference agreed that the present law by which all persons paid from public funds are disqualified from membership of the Legislature should be reconsidered. The United Bermuda Party representatives"—
that is, even the dominant white minority—
said that their Party would consult with the Progressive Labour Party and the Independents in the House of Assembly on this matter with a view to the alteration of the law.


I draw my hon. Friend's particular attention to the words,
… with a view to the alteration of the law.
I understand that an all-party committee was set up, consulted—of course, it was naturally dominated, as one would expect, by the U.B.P.—and, I gather, has recommended that there should be no change in the law. This is utterly false to the promise given to the Constitutional Conference and I would like to hear what my hon. Friend has to say about that and whether anything can be put into the constitution embodied in the Order in Council so as to ensure that all adults otherwise qualified shall be able to stand for election, whether or not they are in receipt of public funds. It is fantastic that, for instance, school teachers should be so debarred.
The third most important issue—and this is the one which I think the Report itself somewhere says is the most important issue—is the question of the division of constituencies. Incidentally, it is extremely inconvenient that we in this House have not got available in the Vote Office the Report of the Boundaries Commission. There are two copies of it in the Library which we are not allowed to remove and bring into the Chamber. This is most inconvenient and my hon. Friends' Department should have made sure that copies were available in the Vote Office.
At any rate, there is no doubt that, although the hon. Member for Torquay brushed aside the distinction between constituencies, between electors and the numerical size of electorates, this is the crux of the inequalities that undoubtedly exist in Bermuda and will continue to exist, although in a somewhat modified form. The constituency boundaries will continue in many cases to be rigged. Originally, the rigging cannot properly have been so described. It was a byproduct of historical circumstances probably. But the deliberate perpetuation of it is, of course, rigging or gerrymandering in the interests of the oligarchy. This is almost as bad in some respects as the rigging of the boundaries in Northern Ireland.
Whereas in the past it would be correct to say that, at any rate in some parts of the island, if one was a coloured

man one's vote was worth one-ninth of the vote of a white man, now it would be worth one-third. It is not a case of one man one vote but of one third of a man one vote—which, of course is a sensational advance.
No doubt because she wanted to speak briefly and get the Bill through quickly, my hon. Friend did not say much about the debate which took place in the Assembly on the Report of the Boundaries Commission. She said that it had been agreed by the Assembly. She did not say that it was very strongly opposed and that there was a vote on it which had a quite substantial minority against it. The vote was 21 to 11. I understand that this is so, but perhaps my hon. Friend will correct me if I am wrong.
Apart from the Pembroke constituency referred to, Devonshire, South is one of the most important constituencies. It is practically all white and happens to be the constituency of the Speaker of the Assembly. Unlike the totally impartial occupant of our Chair, he behaves rather like our Lord Chancellor in another place and descends from the Chair to take part in partisan battles on the Floor of the House—only rather more so than the Lord Chancellor.
The Speaker of the Assembly itself, I understand, was one of those who voted for the adoption of the Report of the Boundaries Commission, which guaranteed him his safe white seat in Devonshire, South constituency. In this House, even if we had the same system as they have in another place, with the Lord Chancellor taking part in the debate in a partisan sense, I think that our Speaker would think it unwise or improper that he should vote for the perpetuation of his own comfortable majority.
Incidentally, this is, of course, another answer, apart from the one that my hon. Friend gave, to the hon. Member for Torquay's point about constituencies in this country not being altogether equal. The constituencies in Bermuda are unequal on a racial basis. That is how the boundaries are rigged and will continue to be rigged to a considerable extent.
I wonder why the Labour Government have paid so little regard to the views of the highly responsible Progressive Labour Party of Bermuda. It is a party whose ideological outlook is rather


similar to that of the British Labour Party, perhaps rather more moderate even, perhaps rather more to the centre than to the left. It has applied for membership of the Socialist International and I believe that its application may be considered favourably but I am not sure about that.
The Socialist International has as its member parties the British Labour Party, the S.P.D., the Scandinavian parties and a number of other parties of unimpeachable respectability. I wish that a little more attention could have been paid by a Labour Government here to the views and aspirations of our comrades in Bermuda who are, at this moment and will continue to be, discriminated against, even if they are discriminated against a little less extremely than in the past. I do not believe that it would have been impossible to take a further step and do the whole thing in one instead of just cautiously step by step.
I understand—and I am sure the hon. Member for Torquay would confirm—that the oligarchy in Bermuda are relatively civilised, gentle people. They are not savages like the Rhodesia Front extremists. They would not have started shooting, rioting, and so on, if we had given the coloured population equal electoral rights. I certainly hope not. It would speak very badly for them if anybody thinks they would. Anything which enhances racial tension is bad. I maintain that this Constitution, retaining these gerrymandered elements of racial privilege, will tend to enhance racial tension. The P.L.P. is not a racialist party, but if, on the one hand, there are these privileges and, on the other hand, people are debarred from equality, inevitably feelings will get worked up and people will vote according to colour, which is a very deplorable thing.
Fifty-nine hon. Members of this House signed a Motion, which said:
That this House will decline to enact any legislation enabling additional powers to be granted to the Legislature of the Colony of Bermuda until such time as that Legislature has provided by law that the House of Assembly of the Island shall be composed of members elected from constituencies of approximately equal population delimited without regard to colour or social status.
The Report says that no regard is to be paid to racial considerations. On the face of it, that looks very fine, but as the

whole basis of the electorate, at any rate in some of the parishes, is racial, some regard should have been had for racial considerations in an effort to carve up the parishes, the constituencies, more equitably between the races so that people would not be tempted to vote according to colour but according to party.
I hope, therefore, that even at this moment, my hon. Friend the Minister of State will consult her colleagues and decide to take the Bill back and have another go at giving true equality and true democracy to the people of Bermuda.

11.23 a.m.

Mr. Nigel Fisher: The new Constitution for Bermuda has been criticised, not on this ground by the hon. Member for Barking (Mr. Driberg), but by the Progressive Labour Party in Bermuda, partly because it follows the same lines of the Bahamas Constitution. This is not unusual, as these two Colonies have always tended to move in step constitutionally, with the Bahamas perhaps a few years in advance of Bermuda. But as I presided over the Bahamas Constitutional Conference and was responsible for its decisions, I feel bound to say a few words in defence of the Bermuda Constitution on this occasion.
The main Bermuda Opposition objection to the Constitution is—just as the main Bahamas Opposition to their Constitution was—simply and solely—and I hope that hon. Members will not think I am being too critical about this—a party political objection. I do not criticise that: we are all politicians. But the objection, in essence, is that the smaller constituencies are over represented and that the larger constituencies are under-represented and that this favours the ruling party in each of these Colonies. It was almost inevitable in the Bahamas, because of the number of out-islands which wanted to return their own member or members as compared with the main island of New Providence.
The same general considerations apply in Bermuda where the parish tradition, as the hon. Lady pointed out, is still very strong. Indeed, they apply in Britain, too. The scale is different in Britain, but, strangly enough, the discrepancy is not. In Bermuda, 28,000 voters return 40 Members of Parliament—an average


of one Member for every 700 votes. I rather envy any Member of Parliament anywhere who has an electorate of only 700.
Under the new Constitution, I understand that 400 electors will return a member in Hamilton, which is the smallest parish, while in Pembroke, the largest parish, 1,100 electors will return one member. That is less than a three to one difference between the two extremes.
In Britain, the two smallest constituencies numerically are the Western Isles and the Ladywood Division of Birmingham, with less than 23,000 electors each. Merioneth and the Exchange Division of Manchester are not much larger with about 25,000 electors each. The largest constituencies are Billericay, with 103,000 electors, and the Langstone Division of Portsmouth, with over 97,000 electors. So, in Britain, there is more than a four-to-one difference between the two extremes as compared with less than a three-to-one difference in Bermuda.
If hon. Members opposite are basing their objections on numbers—as the P.L.P. leader, Mr. Robinson, did in Bermuda—then 1 suggest that the United Kingdom figures are, to say the least, not particularly helpful to their argument.

Mr. Driberg: The hon. Member has not grasped the point that I tried to make — perhaps inadequately — earlier. The population of Billericay is not totally coloured.

Mr. Fisher: The hon. Gentleman always makes his points with admirable clarity, but it is not particularly helpful, in the context of Bermuda, to keep underlining the colour aspect.
I cannot remember what the exact discrepancy is between the largest and smallest constituencies in the Bahamas; but, as my hon. Friend the Member for Torquay (Sir F. Bennett) pointed out. with the same sort of Constitution and the same Opposition objections to it, the P.L.P., led by Mr. Pindling, defeated the U.B.P., led by Sir Roland Symonette, in the recent General Election, so there is, on the face of it, no reason why the Opposition in Bermuda should not achieve power under their new Constitution.

Sir F. Bennett: In furtherance of the valid point my hon. Friend has made, may I remind him that the discrepancies between the two extremes of constituency in the Bahamas is about six-to-one, compared with three-to-one in Bermuda?

Mr. Fisher: I thank my hon. Friend very much. I should have remembered that myself.
The truth is that the Bermuda Constitution, like the Bahamas Constitution, was, as the hon. Lady said, a compromise, and rightly so. The hon. Member for Barking criticised the hon. Lady for not taking sides with the P.L.P.; but, with great respect—the hon. Members knows that I have a great respect and indeed, if I may say so, affection for him—I think that shows a misconception of the British Government's rôle at these conferences. Ministers here are not supposed to take sides according to party affiliations. They are in the middle; they are umpires between the two different parties.
Constitutional conferences always depend on a willingness to compromise and make concessions on both sides. Anyone who has had experience in the old Colonial Office, or, more recently, in the Commonwealth Office, knows that perfectly well.

Mrs. Hart: Does the hon. Gentleman agree that the only alternative is to impose a constitution upon a territory?

Mr. Fisher: I thank the hon. Lady very much. She brings out the point I am trying to make about either imposing a settlement by an arbitrary decision taken in Whitehall, or trying to bring the parties together and acting as a mediator between them. The United Kingdom Government—of any party—is always in the position of an umpire between different political parties in the Colony concerned, and the British Minister in charge of the conference has to act as a mediator between them.

Mrs. Hart: This has been said once or twice, so I should set the record in HANSARD straight. I was not actually responsible for the Constitutional Conference. I moved over to this side of the Commonwealth Office after the conference had been completed in January.

Mr. Fisher: I realise that. I should have remembered that the conference was held before the recent amalgamation. I think that the former Secretary of State for the Colonies was in charge. I am sure that his experience was the same as mine. When I dealt with these things, I never expected to get agreement at the conference table at Lancaster House. I used to try to identify the main points of difference and then bring the two parties together to resolve them. I used to invite first the leaders of one political party and then the leaders of the other political party round to my house.
I would say to Party A, "If you will move a little closer towards the centre on this issue, I will try to get the leaders of Party B to move a little nearer to the centre from their point of view." I tried in that way to bring about a compromise, calling for a sacrifice from both parties of some of the tenets they held very dearly.
Sometimes I succeeded in securing agreement. Sometimes I did not. But neither side should ever be encouraged to win 100 per cent. of its case, because that would mean total humiliation for the other side. It seemed to me that the job of the British Minister in charge was to devise a package deal which was reasonably fair to both sides but about which neither side was very enthusiastic.
I have no doubt that the same technique was employed by Her Majesty's Ministers at the Bermuda Constitutional Conference. Indeed, the very fact, as the hon. Lady said, that some delegates at the conference thought that the Constitution went too far and others thought that it did not go far enough is some evidence that the compromise between these different views was probably roughly right, although I must point out to the hon. Member for Barking that neither the hon. Lady the Minister of State nor my hon. Friend the Member for Torquay equated the two minority Reports. Although I was no longer in any way responsible, I remember urging the U.B.P. leaders when the conference started to accept a compromise which went further than they had wanted to go, because, as I told them at that time, the then Colonial Secretary could not possibly propose any settlement which was

not a compromise, and that is how it worked out.
I do not want to say anything contentious or controversial from a party point of view, because that is not the atmosphere of this debate, but I venture to suggest that the compromise proposed by the Secretary of State at the conference might well have been accepted by both sides but for the extreme and very uncompromising advice given to the Bermuda Opposition by their own constitutional adviser. As the hon. Lady said earlier, one must move gradually in matters of this kind. It is always a process of evolution.
I know that my hon. Friends particularly will agree, but I also believe that the whole House will agree, that, fortunately, we have in Bermuda a very middle-of-the-road Governor, a former colleague of ours here who understands all the politics of the matter very well indeed, who himself, as I think will be universally accepted in the House, has no vestige of colour prejudice, whose whole career has been devoted to the Commonwealth, and whose tact and good sense has been, and I think will be, a sheet anchor of stability combined with progress in Bermuda.
Under his guidance, I am sure that Bermuda will have a happy and a prosperous future; and we all wish her people well in the years ahead.

11.34 a.m.

Mr. James Johnson: I have listened with some fascination to the two opening speeches. Clause 1(4) of the Bill seems quite straightforward in its provision that Orders in Council will be laid before Parliament so that we shall be able to have another look at some of these settlements later. However, the speeches of my hon. Friend the Minister of State and of the hon. Member for Torquay (Sir F. Bennett) caused me some moments of alarm, as they did my hon. Friend the Member for Barking (Mr. Driberg). Not the least cause for concern was the exchange between my hon. Friend the Minister of State and one of her predecessors at the Colonial Office, the hon. Member for Surbiton (Mr. Fisher). I almost began to think that they were


forming a union of past and present Colonial Ministers.
It is not my custom to speak in a colonial debate on an island or colony which I have not visited. Apparently, I am one of the few Members present this morning who has not been to the beautiful island of Bermuda. However, I had the pleasure of meeting many of the delegates at the conference at Lancaster House. Even more important, I listened for a long time to the members of the Opposition, people such as one lady who, I think, was a former Lady Mayoress of Bradford, and a very charming and distinguished coloured lady barrister whose name was Mrs. Lois Browne-Evans. I was impressed by the calibre of the delegates and by the content of their conversations with me. I have checked up on some of the facts they mentioned.
At the time of the November conference some of us asked Questions about the settlement or the Constitution. Last November, we tabled the Motion to which my hon. Friend the Member for Barking has referred. In reply to our Questions, we were told that this Constitution was the best Bermuda ever had. I accept that, because there has been no alteration to Bermuda's Constitution since about 1620. We therefore expect a move forward but we really expected a longer step forward than this.
We appreciate that my hon. Friend the Minister of State must defend this Constitution, or at least accept it and explain it, but she is the legatee of those decisions who have gone before. I agree with my hon. Friend the Member for Barking, having met the delegates to the conference, that we could have done much more than we have done to help the Opposition. I say to the hon. Member for Surbiton that this is not a matter of party. This is a matter of helping the Bermuda have-nots. As I understand colonial society, they are the have-nots, and, on whichever side of this House we sit, we should be concerned with helping those living in this distant island who need our help. This is how I approach this question, not according to whether the Opposition in Mauritius, in Hong Kong or, as in this case, in Bermuda, is sympathetic to my party

or to somebody else's party. These people need help.
I want to refer to the objection that this Constitution is based upon the Bahamas Constitution. I am told that the only coloured member of the United Bermuda Party, Mr. Rattray, following the conference in London, has left the United Bermuda Party on the ground that he does not like this Constitution because it is modelled on the Bahamas one.

Mr. Rowland: If I understand my hon. Friend correctly, he is saying that Mr. Rattray is the only coloured member of the U.B.P. and has left the party. If that is his statement I am sure that he is wrong. He has overlooked the existence of the Hon. E. T. Richards.

Sir F. Bennett: The hon. Member for Kingston-upon-Hull, West (Mr. J. Johnson) may have ignored the fact that at least 12 non-European candidates will be among those adopted by the U.B.P. in the forthcoming elections.

Mr. Johnson: I will defer to those of my colleagues who know the facts better than I. This was my information. I retract my statement if I am assured that it is wrong, and of course, the information was second-hand. The hon. Gentleman the Member for Surbiton said that it was possible for the Opposition to gain power. Nothing is impossible, and much depends upon the composition of the constituencies, but it does appear that unless there is an enormous shift in public opinion, the dice is loaded against the Opposition party ever winning.
Paragraph 7 of the last Government Report, with which the Opposition were in complete disagreement instances the most populous parishes of Pembroke, Devonshire and Sandys. They contain about 23,672 persons out of a total of 42,640 and they return 16 Members to the Assembly. Six other parishes, containing a minority of the population 18,968, send back 24 Members. I listened to the hon. Gentleman the Member for Surbiton comparing Welsh and Irish constituencies, but figures like this are much more than merely marginal.
We have to have a policy which will allow the Progressive Labour Party to have a better chance of gaining power, as, I am told, the former Opposition have


gained power in the Bahamas. In Devonshire parish, I understand that the parish should have been equally divided on the basis of the local population, coloured or otherwise. Instead, to suit the convenience of the majority United Bermudan Party, the division is along the highway, giving an almost entirely white constituency south of the highway which has returned Mr. Speaker. Is it a fact that the Boundary Commission's findings have been debated in the Bermuda Assembly and have been passed?

Mrs. Hart: Yes.

Mr. Johnson: Then we are faced with a fait accompli, and we are being asked to sign a blank cheque.

Mr. Robert Howarth: Since the Speaker of the Assembly has been mentioned, may I say that my understanding is that the old Speaker. if I may use the term, is not standing again?

Mr. Johnson: I have nothing against Speakers, young or old. My concern is about the Constitution which allows a procedure so alien to the customs of this House. I hope that the position where Mr. Speaker can actively affect the decision at the end of a long debate will be ended. It is quite out of order, and against our Anglo-Saxon traditions.
I am also told that teachers, bus drivers and conductors, and other manual workers in public employment will not be allowed to stand as candidates in the election. This will bar hundreds of able, capable artisans, mechanics, shop stewards and the leaders of unions, whose views ought to be heard on the Floor of the Assembly. Instead, the Assembly is to be dominated by a white, monied, landed element. This is an element which our reading of history shows us, is not helpful to mechanics, busmen, conductors or teachers. Can the Minister say in what other Colony this state of affairs prevails?
I would like to protest against the debarring of large sections of the working population, who would make fine members of the Assembly. Government employees should be allowed to stand as candidates. We have also been told that in colonial constitutional discussions it is unusual to make large changes in the constitution against the will of the majority party in power. I suggest that in this case we should pay a little more attention

to the minority, and a little less to the past oligarchy, which has been in power for so long. I sincerely hope that we shall have a second look at these matters, and will be able to debate in this House some of the proposed changes.

11.50 a.m.

Mr. Bryant Godman Irvine: Having had the good fortune to be in Bermuda on three occasions during the past 12 months, I have found the greatest difficulty in recognising any reflection of the happy island which I visited in the speeches which we have just heard from the hon. Members for Barking (Mr. Driberg) and Kingston upon Hull, West (Mr. James Johnson).
I have found it particularly difficult to reconcile my recollection of some of the functions which I attended in Bermuda with the observations which have just been made. One happy occasion which I remember vividly was the presentation of the cups at the end of last year's football competition. It seemed to me that the atmosphere prevailing then was in no way reflected in the speeches of the two hon. Gentlemen.
My hon. Friend the Member for Surbiton (Mr. Fisher) spoke of the position in our own constituency of Billericay, referring to the number of people there who have to cast their votes in order to send a Member to this House and comparing those numbers with the numbers in other constituencies in the United Kingdom. That was all brushed on one side. It did not seem to matter to hon. Members opposite if there was such a situation in Billericay because the faces of the people there are white.
Apparently, it is a matter of no great importance that so many people in Billericay are entitled to a vote for only one Member of Parliament. In Bermuda, on the other hand, where a similar, though relatively much smaller, situation can arise, a large number of people whose faces happen to be of a different colour having to vote for their Member in one constituency, it is said that a vital principle is involved.
It seems to me that a wrong emphasis is being put on that comparison. In my view, the principle should be the same, whether the electorate is in Billericay or in Bermuda. That is the first point I make. I have, as I say, found it difficult


to reconcile the views just expressed with the Bermuda which I have had the good fortune to visit on a few occasions recently.
It seems to me that the White Paper giving the Report of the Bermuda Constitutional Conference contains the answers to most of the points which the two hon. Gentlemen made. For example, in paragraph 6 it is said:
There was general agreement, the Progressive Labour Party representatives dissenting, that all shades of political opinion in Bermuda were represented at the Conference.
Hon. Members have been making a case on behalf of the P.L.P. in Bermuda, but it is clear that there was general agreement at the conference that all shades of political opinion were represented.
Next, at the end of paragraph 10, with reference to the proposed terms of reference for a Boundaries Commission, it was said that,
subject to the foregoing, the Commission should ensure that the constituencies contain as near as may be equal numbers of adult persons, as determined by the immediately preceding census".
It seems, therefore, that, whatever point was being made by either of the two hon. Gentlemen who have just spoken, the answer is given in paragraph 10.
Again, in the middle of paragraph 19 we read:
It was pointed out on behalf of the United Kingdom Government that the form of the new constitution could be made an election issue and that if a majority of members were elected to the House of Assembly who were opposed to some or all of its features the new Government would then have a mandate from the electorate to seek further changes which the United Kingdom Government would, of course, consider.
Thus, we have the view of representatives from Bermuda that all shades of political opinion were represented at the conference. It is stated that the Boundaries Commission would ensure that the constituencies contained as near as may be equal numbers. Finally, it is stated that if, in due course, as a result of the democratic processes of election, a new Constitution were desired, this would be considered by Her Majesty's Government.

Mr. Driberg: The hon. Gentleman is speaking almost as though it were an agreed Report. All shades of opinion

were represented, but there was dissent and disagreement about the Report.

Mr. Godman Irvine: Yes, but what I am pointing out is that, on an objective view of what is stated in the Report, even the three representatives who dissented have legitimate democratic methods available to them of dealing with the problems which they emphasised. I do not agree that there is any reason why we should complain about the Report in the House today.
On another and happier note, I endorse what was said by my hon. Friend the Member for Surbiton about our former colleague. I had the good fortune to hear Lord Martineau make a speech at the Royal Commonwealth Society just after the Constitutional Conference had taken place. I felt then that, if that speech had been read by Members of this House and by people in the Commonwealth, not only would it do a great deal of good to those who read it, but its influence would be very beneficial in all parts of the Commonwealth. I did not want to let this opportunity pass without saying how highly I regarded that speech and how much appreciation I found in Bermuda, in all parts of the island, for the work which he is doing.
I add my good wishes to the people of Bermuda in their next step forward, expressing the hope that they will have a very happy future under this new Constitution.

11.56 a.m.

Mr. Christopher Rowland: Unlike the hon. Member for Torquay (Sir F. Bennett), I have neither the pleasure of owning a cottage in Bermuda nor the agony of having to decide in which House to sit, the Bermuda House or this House of Commons; but I think that I am the last person in the Chamber to have been in Bermuda, and I wish to contribute to the debate on that basis.
As everyone who has been to Bermuda recognises, the island has many unique features. It receives no aid from this country and, therefore, feels more able to look us in the eye in determining its own future. It is not a poor Colony by any standards. The colour bar, so far as it exists at all, is being chipped away gradually but remorselessly by the Governor and those who serve with him and under him. What is, perhaps, the


most significant feature of all has not yet been mentioned. Bermuda has, so far as I know, proportionately the largest white minority—38 per cent. of the population—of any country in the world, certainly of any country in the British Commonwealth. This fact raises certain considerations which I wish to put to the House.
There are other features, also, such as that it cannot be federated with any neighbour. There have been several references to the Caribbean, but it is quite improper even to mention Bermuda in the Caribbean context. It is nowhere near the Caribbean. It is on its own. Partly on that account, Bermuda can never, in my view, look forward to total sovereign independence. I do not believe that an island of 50,000 people, by itself and where it is, can look forward to that prospect. Those are all considerations to be borne in mind in the context of this debate.
Like other hon. Members who have visited the island, I have been struck by two features which must occur to anyone with reasonably progressive tendencies. First, Bermuda needs a revision of its tax policies. A situation in which revenue is raised, basically, by a tax on imported goods, which bears more heavily on the poorer sections of the community, and in which no tax is raised from income or from inheritance is one which cannot be tolerated in the modern world, although it has an incidental advantage in making the foreign tourists, who buy goods in the shops, contribute to the revenue. I am certain that some revision of tax policy is required. The second feature which strikes a visitor is the disparity in voting strength between the various parishes. It is a fair assumption that revision of voting patterns will gradually lead to a revision of the tax structure.
I found particularly noteworthy the caution and, in some quarters, the apprehension of the white "Establishment", if one may use that term, a caution not entirely without foundation. They realise that Bermuda's very prosperous economy is based on three potentially fragile elements: on tourism, mainly from North America; on being a centre of international investment, for tax reasons which I do not pretend to understand—this was recently high-lighted by the existence of

the Barracuda Tanking Corporation in Bermuda, which owns the "Torrey Canyon"; and, third, on the existence of the United States bases.
All three of these ingredients in their prosperity could be affected if there was violent change and I think that because of this the white "Establishment" fears the emergence of party politics based on colour, whether it is their colour or the colour of the coloured community. Because of this fear some do not want any party politics at all, though I believe that they are spitting in the wind in that hope.
I must report what I thought was a slightly disturbing event while I was in Bermuda. It was advertised in the local Press that a meeting was to be held by the Opposition party and to be addressed by a "black power" representative from the United States. Had I known about the meeting I would have attended it as an interested politician but I am glad that I did not because I understand that no white people were admitted and that, in fact, a white journalist was asked to leave.
Those are factors which we have to take into account. I believe that the more sensible and far-sighted members of the white community realise that true democracy, to use a phrase which has been used already, is coming, and they are anxious to have multi-racial parties and some tax reform. It may be that they are making a virtue of necessity, but whatever the spur they are trying to be virtuous. This is not a South African situation where there is a large white minority of about 32 to 33 per cent. of the population arresting the development of the coloured majority.
No one would pretend that it can be equated with that situation. On the other hand, it is not a Kenyan situation where the white minority was so small—and, of course, it was even smaller elsewhere—that its interest could be rolled over by the British Government of the day. It is in neither of those categories and I think that this determines the speed at which the British Government are deciding to go.
By Bermudan historical standards, I think that the white "Establishment" has accepted quite rapid change already. Only four years ago there was only the property vote. Now there is universal suffrage for everybody over 21, with no property vote. I think that only four years ago the idea


of there being any move towards justice in the number of seats being granted would have been thrown out of court. Some move has been made in the case of Pembroke. For a country which has had a restricted franchise for the previous 343 years and with the Legislature the size of which has been fixed for the previous 267 years, this is quite fast progress in four years.

Mr. Fisher: Hear, hear.

Mr. Rowland: I am not trying to advance the doctrine of "unripe time", that time is never right for any change. What I am suggesting is that so long as some movement is assured one can accept a policy of one step at a time.
As my hon. Friend the Member for Barking (Mr. Driberg) has said, the boundaries were not rigged in the sense that people sat down and decided consciously to rig them. They are the by-product of the history of the parish system, but hon. Gentlemen opposite who may share many of the views which I have expressed do not serve their argument by trying to defend the present disparities in electoral sizes by referring to this country. I think that the only reason why they remain defensible is that change overnight would mean a pace of change which would give rise to some apprehensions in some quarters in Bermuda. This is the only reason for going slowly and not by trying to show that it is no worse than Ladywood and Billericay. With respect, I think that this is a dangerous argument to use.
I have some reservations even about the Bill as proposed. It seems to me that in conjunction with the Bermudians we are landing them with a somewhat large superstructure of government, with a non-elected Legislative Council of 11 members and an elected Executive Council of seven or more members. There will be two chambers, the lower one consisting of 40 elected members. I cannot help but reflect that as more people voted for me in Meriden than voted in the whole of Bermuda at the last election, and that if I add my opposition vote there were more votes than the whole population of Bermuda, 40 members is probably rather high.
The last point of my intervention is really to ask my hon. Friend to reiterate

in unequivocal terms something which she probably thinks she has done. I would like an assurance that there will be further movement. Paragraph 17 of the White Paper says:
An assurance was given that the Secretary of State would not advise the making of any Order in Council to revoke or amend the new Constitution, without consulting the Bermuda Government…".
The implication of that is that a revoking or amending may take place even if the Bermuda Government do not like it, because the consultation does not imply that agreement is necessary.
I hope that that is roughly the situation, but paragraph 19 says:
It was pointed out on behalf of the United Kingdom Government that the form of the new Constitution could be made an election issue and that if a majority of members were elected to the House of Assembly who were opposed to some or all of its features the new Government would then have a mandate from the electorate to seek further changes which the United Kingdom Government would, of course, consider.
I think that that gives the impression that if the majority of elected members do not want change there may be none. What hon. Members on this side of the House are trying to get clear is that if the party representing the majority of the popular vote, which may have only a minority of members in the new Legislature, want change the British Government will consider it even if the majority of members are still reluctant to go any further forward.
I support the cautious advance which the British Government are making. I think that this is almost a unique Colony, certainly unique in its racial balance. I think that this is a good reason for going carefully, but I give my support to the Bill in the belief and hope that we are in no way qualifying our determination to go ahead eventually to the true democracy in which I am sure hon. Members on both sides of the House believe.

12.8 p.m.

Mr. Neil Carmichael: I was one of the Members who had the privilege of being in Bermuda earlier this year. I would not claim that a six-and-a-half or seven-day visit gives me any kind of authority to speak for Bermuda, but I think that one's interest in a place is increased considerably


if one has been there and talked to people about the problems of the new Constitution with which many of them were concerned at the beginning of March.
I am slightly horrified at what my hon. Friend the Member for Meriden (Mr. Rowland) said about a "black power" meeting from which all white people were excluded. I hope that this is not a general trend in the island. I think that we should be careful when we talk about politics in Bermuda becoming a matter of colour, because it has been very much a matter of colour up to now. The only difference is that it has been absolute white control. We sometimes take the view that white is not a colour, but I think that this is a matter about which we must be very careful.
I agree with what my hon. Friend said about this being rather an elaborate Constitution for an island of fewer than 50,000 people. This is a point which the P.L.P. raised in its minority Report. It also questioned the power of the governor to appoint a chief justice, and I think that this matter should be looked at again. Its suggestion that the Privy Council should appoint the Chief Justice may remove some difficulties which possibly have a legitimate basis.
I want to deal for a few moments with the Report of the Lancaster House conference and with the P.L.P. minority Report. As been mentioned by some of my hon. Friends, we are all aware that the conference comprised a group of people who were apparently representative of the parties in Bermuda, as they were elected. But the P.L.P. claims to speak for the majority of the people of Burmuda, though only a free franchise would prove it; vet it had a very small representation. Had democracy as we are trying to frame it now been in vogue in Bermuda, the representation at that conference would have been very different, and another Constitution might have emerged creating different conditions for the advancement of Bermuda.
I agree with the criticism about the elaborateness of the Constitution. In a country the size of Bermuda, it is impossible to think in terms of full-time members, and an Assembly of 40 Members on a part-time basis is probably a good idea. Such part-time members have an intimacy with the people, and they meet

about once a fortnight, very much like a local authority in this country.
Mention has been made of the disparity between electors in this country when making a comparison between our Constitution and that proposed for Bermuda. I think that it is completely false, not least because Bermuda happens to be an island where there are colour differences. That is something which, to an extent, affects how people vote. It may be reprehensible that decisions should be made on that basis, but perhaps some people will do so, just as people in Britain make decisions on a basis which is not completely rational or political. However, in Britain, where there is a disparity between electors, apart from colour—and I exclude Northern Ireland, which is completely beyond my understanding—surely it is because we are a fairly large nation needing to rebuild and change the face of the country, with huge masses of people moving from one part of the country to another.
The process of bringing the electoral register and constituencies up to date is a continuous one. In addition, for reasons of geography, we have to make special arrangements for places like the Western Isles, Orkney and Shetland and certain Welsh areas. From the electoral point of view, none of us who have small neat city constituencies envy people like my hon. Friend the Member for the Western Isles (Mr. Malcolm MacMillan) who has to take a plane, boat or car to address a single meeting. There are physical difficulties involved in the disparity between constituencies in Britain, so it is unfair to make a quick and facile comparison such as that which was made in the minority Report by the U.B.P.
There is a case for looking closely at the minority Report of the Progressive Labour Party when it refers to the multiplicity of boards in Bermuda. It occurs to me that some method might be evolved whereby a neater and more manageable Civil Service was established to obviate the necessity for so many of these boards.
Like my hon. Friend the Member for Barking (Mr. Driberg), I am concerned to know who went out to show the people of Bermuda the method which is used in this county to bring our electoral register up to date. When I was there, I was told that there is comparatively little illiteracy and that perhaps, on a pro rata basis,


it is very close to our own rate. It would appear to me that someone from this country representing the Registrar-General who had served on some of Mr. Speaker's Panels would be better than someone who had been at the Colonial Office, where, no matter how impartial one may be, certain attitudes are built up, and who would be inclined to take with him attitudes from some other part of the world which are not necessarily applicable to Bermuda.
There has been some discussion about the qualifications of candidates. Even local authorities in this country will need to waive a great many of the old restrictions which were introduced for good reasons but which have now become ridiculous whereby people who are extremely well qualified are prohibited from election to local government. In an island the size of Bermuda, it seems to be even more ludicrous that even minor public servants are not allowed—

Mrs. Hart: Since it seems unlikely that we shall finish the debate this morning, perhaps I might correct one false impression voiced by my hon. Friend the Member for Barking (Mr. Driberg) and repeated by my hon. Friend the Member for Glasgow, Woodside (Mr. Carmichael). It was suggested by my hon. Friend the Member for Barking that the Select Committee which was looking into the qualifications of members of the public service to be candidates in elections had reported against making any changes. However, according to our latest information received from the Governor last night, that is not the case. The Select Committee is still looking into it and has not yet reported.

Mr. Carmichael: That is something which we all welcome, bearing in mind particularly what I have been trying to say in relation to our own local government.
There are many of these old-established conditions which are not suitable for life in modern Britain, and I hope that that can be said of Bermuda as well. For example, obviously there are considerable objections to the division of constituencies, and I will not weary the House by going through the arguments again.
I hope that what has been said in the debate this morning will be accepted in Bermuda in the spirit which most of us intend. We are looking for the best Constitution which will allow the people of Bermuda to continue to enjoy their present high level of prosperity, at the same time ensuring for the future that the divisions which exist there are given proper political expression and that nothing is done by this House which will cause that political expression to create anything disturbing to the tranquillity and prosperity of the island.

12.20 p.m.

Mr. Robert Howarth: I wish to be brief, as, if I take only a few minutes, it will still be possible to secure the Second Reading—

Mrs. Hart: I should not like my hon. Friend to be under that impression. I, and, probably, the hon. Member for Torquay (Sir F. Bennett), will need a considerable time—perhaps a quarter of an hour or 20 minutes—to reply, which means that we could not possibly finish this morning and would be bound to resume another time.

Mr. Howarth: I thank my hon. Friend for that information.
Like my hon. Friend the Member for Glasgow, Woodside (Mr. Carmichael), I had the privilege of attending the Anglo-American Annual Conference in Bermuda in March, when we toured the island and met the people in the political movements. I would confirm that it appears to be a friendly and happy island, with a high standard of living. When many of my colleagues went golfing in the afternoon, I would wander around the island—not being as energetic as they—and visit parts which I do not think they saw, like the rear suburbs of some of the main towns, talking to people and watching the school children at play.
I saw no poor housing like that in my industrial constituency and which is a feature of all our old industrial areas. It has an impressive standard of living for all sections of the population. I recognise that the basis for this could disappear, if events discourage tourism or—the island will eventually have to face this—if the Americans withdraw from their base in the north.
We were entertained by representatives of the old white oligarchy, but it was also possible at receptions and on other occasions to meet a broader representation of the population. The comfortable Victorian existence of the old white rich families in the past is slowly changing. I recognise that, as an old Colony, they have a form of Constitution which has only recently been brought more into line with our thinking and I suppose that many representatives of the old order do not welcome this. I appreciate that. At one reception, I was buttonholed by a number of these people who said that they were disgusted not only with us, but presumably with hon. Members opposite who began the wind of change in Africa under a previous Prime Minister. This was not to this group's liking.
From my contacts and discussions, I formed the impression that there is a liberal wing of progressive people in the United Bermuda Party who recognise that changes are inevitable in their interests and those of the island, and are engaged in a constant struggle with the more conservative elements in the party. It appears to be a multi-racial party. Although it is still dominated by the old order, changes are being made in the right direction. It these are gradual and acceptable to the majority, the liberal wing has good prospects, but if events go too fast, this will only strengthen the more reactionary elements and lead to difficulties.
My first contact with the representatives of the P.L.P. was at a meeting in this House, to hear their report on the situation after the Constitutional Conference earlier this year. I was staggered at their choice of constitutional adviser, which was most unfortunate, to say the least. My hon. Friend the Member for Barking (Mr. Driberg) referred to the P.L.P. as having similar ideas to ours. This is true, possibly, for most of the representatives that I met, but not, I believe, of their constitutional adviser—

Mr. Driberg: He is still a member of the Labour Party.

Mr. Howarth: That may be so, but his rôle in Africa, from which he did not dissociate himself—he was thrown out after the changes in Ghana—makes him very suspect. I wish that the P.L.P. had chosen better, which might have led to a better result from the conference—

Mr. Driberg: My hon. Friend has made a very serious attack on a former colleague of ours in the House, who gave a very good service here, and who is still, as far as I know, a member of the Labour Party. Would my hon. Friend at least not suspend judgment until this gentleman's book comes out shortly, when he will give a full account of his experiences in Africa and can then be judged?

Mr. Howarth: I will be interested to read this book, but the events in Ghana and the development of Nkrumah's dictatorship—that is not in dispute, although the role this man played is open to various interpretations, I agree—still leads me to believe that the P.L.P.'s choice of adviser was most unfortunate and did not help the conference. I told them so when I met them in Bermuda in March and gave my reasons. This is now part of history, but I felt that I ought to say it.
There have been splits in the P.L.P. since the Constitutional Conference, I understand, perhaps because some members of the party are wedded to the ideas of democratic Socialism and others are far removed from them. In discussing this sort of political change in this House calmly and dispassionately, we must remember that this is not always the atmosphere of some developing countries—although Bermuda is not in that category—where political development is not always at our level. This must be considered.
I support the Bill. I have the reservations of my hon. Friend the Member for Meriden (Mr. Rowland) and we should be happy to have answers to these questions from my hon. Friend. We look forward to her reply. Her intervention in the speech of my hon. Friend the Member for Woodside is encouraging and seems to contradict information given to hon. Members—

Mr. Driberg: I find that both the Minister of State and I were right in our different ways. The Committee is still technically sitting, but the U.B.P. majority has decided to make no change. It is thought to be holding back the report until after this debate, so that the debate may not be adversely influenced.

Mr. Howarth: Someone may have miscalculated, because the debate is continuing.
Bermuda is a multi-racial society with inherent problems, but I am confident that its general prosperity—because of the accidents of geography and development over the last 20 years—offers the prospect of progress if the changes are evolutionary and roughly in line with those advocated—

It being half past Twelve o'clock, the debate stood adjourned.

Debate to be resumed Tomorrow.

Orders of the Day — TELEPHONE SERVICE (ROTTINGDEAN EXCHANGE)

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Howie.]

12.30 p.m.

Mr. Dennis Hobden (Brighton, Kemp-town): The matter which I wish to raise is a disgraceful state of affairs and a glaring example of an ordinary citizen's harsh treatment by a Government Department. A constituent of mine, Mr. Cyril Woodcock, owns a property known as Poet's House, because the poet Sir William Watson used to own it. It is a charming property, consisting of a maisonette with five rooms on the upper floor, and a shop below bringing in £416 per annum. It is in Marine Drive, Rottingdean, overlooking the sea. Rottingdean is an old-world suburb of my constituency in Kemptown, Brighton.
My grievance arises from the erection of an automatic telephone exchange immediately behind this property. Some years ago, part of the rear garden of Poet's House was sold and a bungalow built on the site. This caused no difficulties or complaints from neighbouring property owners, but the G.P.O., to expand their telephone services, bought the site after a long period, demolished the bungalow and built the new exchange.
This started the trouble for Mr. Woodcock. The exchange eventually drove him elsewhere, as it was three and a half feet from the back door of Poet's House and, when it began operating, it produced flashing lights, continuous noise and interference with television reception and, worst of all, overshadowed his premises. These factors drove him to find peace of mind elsewhere.
But it was one thing to move and another to sell the house. It had been valued at £8,500, but despite having been on the market for almost two years, it has not been sold. He has reduced the price to £6,000, but still cannot sell it. This is extraordinary, as any vacant property in Rottingdean is usually immediately sought after because of the neighbourhood's character. Mr. Woodcock cannot sell his property because of the exchange, without which the maisonette and the shop would undoubtedly have been sold at the original price long before now.
I place the responsibility for this on the Post Office and the Postmaster-General and nobody else, but trying to get justice for the owner is another matter, because my right hon. Friend is running away and denying responsibility. I thought that this would be an ideal case for the newly appointed Parliamentary Commissioner to investigate, but I find that Sir Edmund Compton has no jurisdiction in this type of case. This might be a clear example of another Government non-starter, so I come back to my right hon. Friend the Postmaster-General to seek justice. However, so far, I have looked in vain.
My right hon. Friend and I have had continuous correspondence since November last year. In the Postmaster-General's letter to me dated 14th September, 1966, he agreed and admitted that the new telephone exchange stood close to the rear of Poet's House. He went on to make the absurd statement that the exchange had not impaired the amenities to such an extent that an ex gratia payment should be offered.
This is manifestly absurd and is disproved by the fact that nobody would purchase the premises at the present ridiculously cheap price. One has only to visit the premises to see why this should be the case. My right hon. Friend's letter also referred to the fact that, in accordance with the usual procedure, the building plans were put to the local authority, which had approved them after meeting a number of objections.
I feel qualified to comment on this aspect because not only was I an employee of the Brighton Post Office before coming to this House, but for a number of years was a member of Brighton's


Town Planning Committee. This matter was never a straightforward issue of planning permission, and the Minister knows that Government Departments do not necessarily have to obtain planning consent, but can erect buildings where and when they like. Nevertheless, they go through the motions of consulting local authorities, although I believe that the procedures place some duress on these authorities.
In this case, there is a wider history. I have mentioned that the site of this controversy is Rottingdean, a charming, old-world village whose residents are rightly fierce in protecting the amenities and character of the area. Rottingdean also has an active Preservation Society which has for many years performed sterling work in ensuring that no planning blunders disturb the neighbourhood. It has been largely successful in its endeavours.
The local authority has co-operated with the Preservation Society on every possible occasion to make sure that Rottingdean retains its charm. But the local authority has been under other pressures. For example, the G.P.O. pointed out that there could be no extension of the telephone exchange in the area while it could not find a suitable site for an exchange. Earlier sites had come under public criticism and, as the delay in finding a suitable site continued, so the pressures on the telephone service became worse and the number of complaints increased.
It is against this background that Brighton's Planning Committee, in a mood of near-desperation, gave its planning consent. But it was a consent forced on it by the urgency of the situation and the knowledge that, in the end, the G.P.O. could build where it liked and if it liked without so much as a "By your leave".
Mr. Woodcock, as the victim, because he has been forced to move from Poet's House, now has a large mortgage on his new house and cannot sell Poet's House. His plight is one of urgency which requires an urgent solution. Despite this, my right hon. Friend continues with his claim that the owners have no claim in law for compensation. He says in his letter that the solicitors representing Mr. Woodcock were invited to submit specific

details of any claim the owners might have; and my right hon. Friend maintains that such details have not been submitted.
The truth of the matter is that the solicitors representing Mr. Woodcock have done nothing but draw the attention of my right hon. Friend to the financial implications and loss of amenity. Mr. Woodcock has done the same, and so have I. My right hon. Friend has all these facts. What more does he want? Is not the truth that this is a case of prevarication and subterfuge, with my right hon. Friend sheltering behind legal gobbledegook?
It is prudent to mention that at one time the G.P.O. was prepared to purchase Poet's House, but because it could not obtain planning assurances from the local authority, it did not proceed with the deal. However, Mr. Woodcock has been left with a sizeable can to carry as a result of the planning permission the G.P.O. managed to obtain. This is not a case where the Minister should take refuge behind the comparative safety of the legal advice he may have been given.
Enough money has already been spent by Mr. Woodcock in trying to obtain justice and this is clearly a case where some humanity is required. I demand it from a Labour Postmaster-General. I want an assurance that my hon. Friend the Assistant Postmaster-General concedes that an injustice has been suffered and that, on humanitarian grounds alone, the Department is prepared to arbitrate on this question, because for far too long this matter has been left hanging in the air.
It is equally true to say that this whole issue has left a nasty taste in everybody's mouth. It is another of those occasions when the suffocating bureaucracy of a Government Department is unable, or refuses, to mete out justice to an ordinary citizen—another example of the humble individual having his rights treated in a deplorable way.
The solicitors acting for Mr. Woodcock have said in correspondence that this is a flagrant example of the Post Office overriding the private citizen in a dictatorial fashion, and then declining to pay compensation for the continuing damage. I wholeheartedly agree with that sentiment.
This matter is a scandal and should not happen under a Labour Administration. Even worse, it is a disgrace that a Labour Minister should countenance such injustice. I urge my hon. Friend to think again, to show that there can be a human side to a public undertaking and that the rights of ordinary individuals, even though sometimes they may not be specifically backed by legal arguments, will be protected by an understanding Minister and Department.

12.41 p.m.

The Assistant Postmaster-General (Mr. Joseph Slater): I congratulate my hon. Friend the Member for Brighton, Kemptown (Mr. Hobden) on his success in being able to raise this matter on the Adjournment. I have listened most carefully to his exposition. He has been rather vociferous in his comments about the attitude of my Department in this matter. He has been directly critical of the attitude of my right hon. Friend, who is responsible for the Department, and I will endeavour to put the side of the Post Office against the case which my hon. Friend has put on behalf of his constituent.
I quite understand that Mrs. Grey should feel strongly about this issue. I say Mrs. Grey rather than Mr. Woodcock because we understand that the representations made about Poet's Corner were made on her behalf. Most of us, if we had an open piece of land next to our home, would prefer that it should not be built on. But, equally, the owner of such a piece of land must, within proper limits, have the right to make use of it; and to put the matter in perspective I will briefly go over the history of it as seen from the Post Office side.
As my hon. Friend is aware, we have a tremendous demand for telephones, particularly in the south-east of England. If we are to meet it, we must install more equipment in our telephone exchanges. This means, in many cases, that we have to enlarge the building. Rottingdean is such a case. We needed to enlarge the exchange; so, in 1963, we bought an adjacent house and garden. This is the piece of land behind Mrs. Grey's property on which the extension to the exchange has been built.
By a long-standing administrative arrangement, the Post Office, like other

Government Departments, consults local planning authorities to obtain planning clearance for its developments. We did this as regards Rottingdean Exchange in 1962. The planning authority, in the usual way, invited comments from the owners and occupiers of neighbouring property, including Mrs. Grey. After it had considered these comments, and agreed with us about some modification of our proposals, the authority gave its clearance.
About two and a half years later, in June, 1965, when the extension to the exchange was being built, a firm of solicitors acting for Mrs. Grey drew attention to the possibility of damage to the foundations of her house, and claimed compensation for loss of light and amenity owing to the erection of the new building. The Post Office solicitor replied saying that he did not understand on what legal grounds Mrs. Grey could claim that the Post Office development had depreciated the value of her property.
We heard nothing further until November, 1965, when the solicitors asked whether the Post Office would be willing to buy Mrs. Grey's property for a possible further extension of the exchange. We considered this suggestion most carefully, and, indeed, got to the point of agreeing a purchase price, but the local planning authority then made it clear that planning clearance was unlikely to be given for a further extension of the exchange on Mrs. Grey's property.
In these circumstances, we decided that the property would be of no use to us, and early in 1966, through our agents, the Ministry of Public Building and Works, we told Mrs. Grey's agents that we were no longer interested in the purchase.
About six months later Mrs. Grey's solicitors—not the original solicitors, but another firm—wrote to us claiming that much damage had been and was being done to her property and to her rights as an owner. They also said that legal proceedings were contemplated in the absence of any proposals from the Post Office to compensate Mrs. Grey. They also asked how it was that planning permission had been given for the extension without consultation with Mrs. Grey.
The Post Office solicitor, in reply, referred them to the letter he had sent in 1965 to the solicitors then acting for Mrs. Grey, and explained the procedure by


which we had obtained planning clearance. In reply, Mrs. Grey's solicitors said that, unless the Post Office wished to revive the idea of buying her property, they would take the necessary steps to enforce her claim. On being told that we still did not wish to purchase the property, they said that proceedings were being drafted and that they were seeking to arrange for the matter to be raised in this House.
Shortly after this, my hon. Friend, the Member for Brighton, Kemptown wrote to my right hon. Friend the Postmaster-General about the matter. My right hon. Friend explained that he was advised that Mrs. Grey did not appear to have any legal claim and that the new building, though it stood close to a part of Mrs. Grey's house, did not appear to have impaired her amenities to such an extent as to justify any offer of an ex gratia payment in compensation; and he indicated that we had not received, but would, of course, consider carefully if they were received, specific details of any legal claim.
If, for example, infringement of rights of light was claimed, the Post Office would need to know the extent of the interference with access of light to each window and the use to which the affected rooms were put; or, if Mrs. Grey were claiming that the structure of her house had been damaged, it would be necessary to know the nature and extent of the damage. Without such details there was no judging whether there was any validity in the claim.
This really is the vital point. Though it is difficult to be certain, in the absence of specific details, the advice my right hon. Friend has received is that Mrs. Grey does not appear to have any legal claim. We have invited her solicitors to send us details if they think that she has a legal claim, and I should like this

morning to repeat that invitation. If they are in any doubt about what is required, the Post Office solicitor will be glad to clarify this point if they will get in touch with him.
Except in so far as there is an infringement of a legal right, a claim on the ground of loss of amenity is a claim for an ex gratia payment, and we do not think that there has been such an impairment of amenity as would justify such a payment. It is true that Mrs. Grey's house is on the seafront and, naturally, is designed to get the maximum benefit from the sea view and the sunshine from the south. The extension to the telephone exchange is behind the house and to the north of it. The view which Mrs. Grey claims is blocked by our extension is inland to the Downs, and the extent to which this view could be enjoyed from the house was, I suggest, even before the extension to the exchange, extremely limited.
I can quite understand Mrs. Grey's feelings about this matter, but as owners of the adjoining land we are entitled to make use of it within proper limits. We need to do so to give an essential service to the local community. I repeat the invitation we have made to Mrs. Greay's solicitors to send us specific details of any claim they feel she may have, and I can assure my hon. Friend, who has so ably presented the case on behalf of his constituent, that any such details will be given careful and proper examination. Beyond this, with the best will in the world, it would not be right for me to go in this matter, which has been going on for so long.

The debate having been concluded, Mr. DEPUTY SPEAKER suspended the Sitting until half-past Two o'clock, pursuant to Order.

Sitting resumed at 2.30 p.m.

PRIVATE BUSINESS

CHURCHES AND UNIVERSITIES (SCOTLAND) WIDOWS' AND ORPHANS' FUND (AMENDMENT) ORDER CONFIRMATION

Bill to confirm a Provisional Order under the Private Legislation Procedure Scotland) Act, 1936, relating to the Churches and Universities (Scotland) Widows' and Orphans' Fund (Amendment), presented by Mr. Ross (under section 7 of the Act); and ordered to be considered upon Tuesday next and to be printed. [Bill 277.]

PITTENWEEM HARBOUR ORDER CONFIRMATION

Bill to confirm a Provisional Order under the Private Legislation Procedure (Scotland) Act, 1936, relating to Pittenweem Harbour, presented by Mr. Ross (under Section 7 of the Act); and ordered to be considered upon Tuesday next and to be printed. [Bill 278.]

ROYAL BANK OF SCOTLAND ORDER CONFIRMATION

Bill to confirm a Provisional Order under the Private Legislation Procedure (Scotland) Act, 1936, relating to the Royal Bank of Scotland, presented by Mr. Ross (under Section 1 of the Act); and ordered to be considered upon Tuesday next and to be printed. [Bill 279.]

ST. ANDREWS LINKS ORDER CONFIRMATION

Bill to confirm a Provisional Order under the Private Legislation Procedure (Scotland) Act, 1936, relating to St. Andrews Links, presented by Mr. Ross (under Section 7 of the Act); and ordered to be considered upon Tuesday next and to be printed. [Bill 280.]

Oral Answers to Questions — BOARD OF TRADE

Textiles (Dumping)

Mr. Ronald Atkins: asked the President of the Board of Trade if he will introduce more effective measures, such

as those operating in Canada, details of which have been sent to him, to prevent the dumping of textiles in the United Kingdom.

The President of the Board of Trade (Mr. Douglas Jay): No, Sir. Certificates of the domestic value of imports are no, required under our valuation system and they would not reduce the need for the necessary investigation of anti-dumping applications.

Mr. Atkins: Is my right hon. Friend aware that efficient and knowledgeable British manufacturers with experience in exporting to Canada would be well satisfied with the protection which the measures in Canada give against dumping?

Mr. Jay: Yes, but I am sure that my hon. Friend knows that under the Kennedy Round negotiations the Canadians as well as ourselves have agreed to a new system of anti-dumping procedures which is much more akin to our present system. Therefore, I do not think we should wish at this stage to move towards the Canadian system.

Mr. Blackburn: Is my right hon. Friend aware that our present antidumping regulations are of no use at all to the textile industry because their application is to the whole industry, whereas the attack on the British textile industry has been on one section after another?

Mr. Jay: We are very ready to conduct, and have conducted, a lot of investigations in recent months into the possibilities of an anti-dumping Order on textiles, but we must have the proper evidence and supporting information to introduce one.

Textile Industry (European Economic Community)

Mr. Ronald Atkins: asked the President of the Board of Trade if he will take measures to ensure that the British cotton industry will at least maintain its present productive capacity so that it will be able to take advantage of the European Economic Community market, which is highly protected from cheap-labour cottons.

Mr. Jay: The increase in productivity and the improvement in the structure and equipment of the cotton and man-made fibre sector of the textile industry should


lead to an increase in its potential output and enable it to take full advantage of export opportunities.

Mr. Atkins: If my right hon. Friend seeks to imply that the cotton industry is less efficient than similar industries in the United States, Canada and Europe, which implication I would not accept, does he assume that he should withdraw protection against more efficient industries? Does he assert for instance, that the right treatment for a patient ailing from double pneumonia is a cold bath?

Mr. Jay: I think that the evidence shows that our textile industry is more efficient than some overseas, but it is less efficient than others. What we should all wish to do now is to press on, as we are doing in consultation with the Textile Council, with all possible measures to increase efficiency and productivity.

Mr. Frank Allaun: Is my right hon. Friend aware of the dissatisfaction amongst Lancashire Labour M.P.s with his failure to control the stream of low-wage imports and of their view that, if he has an obligation and commitments to E.F.T.A., he also has obligations and commitments to Lancashire?

Mr. Jay: I am also dissatisfied with the inability of some of my hon. Friends to understand that last year imports were much lower than they were in previous years.

Mr. Crouch: asked the President of the Board of Trade whether, in view of Great Britain's possible entry into the Common Market, he will make a statement of the progress made in the reorganisation of the structure of the textile industry.

Mr. Jay: The competitive position of the cotton and man-made fibre sector of the textile industry has been greatly strengthened over the last four years in a number of ways—by substantial investment in modern machinery, by an increased readiness to adopt shift working where this is economic, and by a number of vertical and horizontal mergers. This reorganisation, which is still progressing, and which should be further encouraged by the Productivity Study which the Textile Council is undertaking, should enable the British industry to meet competition at home and abroad.

Mr. Crouch: I am obliged to the right hon. Gentleman for giving me such a full answer, but he will have heard in recent days of a statement by the wool side of the textile industry of its confidence regarding possible entry into the Common Market. Has he had a similar expression of confidence from the other side of the Pennines?

Mr. Jay: I could not say without notice, but I think that those on the west of the Pennines are as well informed as those on the other side.

Russian Watches (Imports)

Mr. Patrick Jenkin: asked the President of the Board of Trade what investigations his Department has made into allegations that Russian-made watches are being imported into Great Britain at dumped prices; and if he will make a statement.

Mr. Jay: I have received evidence that watches are being imported from the Soviet Union at prices below the cost of production of similar articles in Western Europe. This evidence is being considered with a view to discussions with the Soviet authorities shortly.

Mr. Patrick Jenkin: Will the President of the Board of Trade undertake to press forward his discussions with the greatest urgency? Does he recognise that this flood of imports of cheap Russian-made watches is causing severe damage to the British watch trade? If he wants the British watch industry to survive, does he recognise that he must act pretty quickly?

Mr. Jay: Yes, certainly; our watch industry is of great importance. On the other hand, our imports from Russia are a very small proportion of total sales of watches in the British market.

Manufacturing Industry (Investment)

Mr. Patrick Jenkin: asked the President of the Board of Trade whether he is satisfied with the anticipated level of investment in manufacturing industry; and what steps he is contemplating to effect an improvement.

Mr. Jay: The results of my Department's latest inquiry into industry's investment intention will be available next


week. My impression is that the measures that the Government have already taken are having a favourable effect on investment plans. The further acceleration in payment of investment grants announced this morning will be an additional stimulus.

Mr. Patrick Jenkin: Does not the President of the Board of Trade recognise that we are in a very serious situation with regard to the level of manufacturing investment? There appears to be no evidence as yet from any other source—we shall await his Department's report next week with great interest—that the level of investment is doing other than continuing the decline which has been reported over recent months. Does not he recognise that the implications of this for the long-term future of the country's economy are very serious indeed?

Mr. Jay: Yes, but the hon. Gentleman should not denigrate his own country too much. The information at present available on investment in the early part of this year shows that the fall is a good deal less than some of the forecasts which have been made.

Sir G. Nabarro: Is not manufacturing investment in the private sector running at 15 per cent. to 20 per cent. lower than last year? Should not these figures give cause for grave anxiety?

Mr. Jay: No, Sir; this is a considerable exaggeration. [HON. MEMBERS: "Wrong again."] I am sure that the hon. Baronet will be glad—

Sir G. Nabarro: I am not a baronet. Wrong again.

Mr. Jay: I always live in hope as far as the hon. Gentleman is concerned. I assure him, as I am sure he will be glad to know, that the increase in public investment is making up for many of the shortcomings of private investment.

Price Increases (Investigations)

Mr. Boyd-Carpenter: asked the President of the Board of Trade why members of the public who respond to his invitation to report price increases which appear to need investigation are not informed of the result of his investigation of the complaints submitted by them.

Mr. Jay: These reports have been very useful but, as was made clear when they were invited, it would not have been practicable to inform each individual correspondent of the results of investigations.

Mr. Boyd-Carpenter: How on earth does the right hon. Gentleman imagine that he can keep the co-operation of the public if, when people try to co-operate and help him, he does not even tell them whether, in the event, their complaints have been justified? How are they to know whether he has done anything at all?

Mr. Jay: Hon. Members opposite are constantly advising and urging us to employ fewer officials in the Government service. In this case, if we were to do all that the right hon. Gentleman requires, we should have to employ a lot more people than we do at present. I think that we have achieved the right balance, and I assure the right hon. Gentleman that action is taken, if on some occasions a letter is not written as well.

Advertising (Research)

Mr. Alison: asked the President of the Board of Trade what consultations he has had with industry about the scope of his proposed research project into the economic effects of advertising.

Mr. Jay: A preliminary discussion with representatives of the Confederation of British Industry and of the Advertising Association took place on 24th May.

Mr. Alison: Will the right hon. Gentleman confirm that he is not contemplating any tax or levy on advertising as proposed by the Reith Committee set up by the late Hugh Gaitskell?

Mr. Jay: I am contemplating an inquiry. It is always best to discover the facts before deciding what action we should take.

Mr. Winnick: Does my right hon. Friend agree that, although there is good and bad advertising, basically the advertising business in this country serves a useful and positive rôle?

Mr. Jay: Yes, Sir, though far be it from me to distinguish at this moment between the good and the bad advertising.

Investment Grants

Mr. Alison: asked the President of the Board of Trade why investment grants under the Industrial Development Act are payable for the installation of electrical generating equipment.

The Minister of State, Board of Trade (Mr. George Darling): Generating equipment installed by a firm to provide power solely for its own use in carrying on a qualifying industrial process such as manufacturing qualifies for grant in the same way as other ancillary plant or machinery. Where the equipment is installed for the purpose of supplying power to others, grants will be given only in exceptional cases after consideration of the implications for the public generating authorities.

Mr. Alison: As the Government have recently had to announce a huge increase in the price of publicly generated electricity because of a fall in the volume of sales, is not the giving of encouragement to private industry to generate electricity privately an example of administrative schizophrenia?

Mr. Darling: There are two answers to that. The point about working in conjunction with the public generating authorities goes back to legislation passed in 1909. On the other point, I am not sure that the increase in electricity charges is due solely, or even largely, to a falling off in demand.

Mr. G. Campbell: asked the President of the Board of Trade whether any investment grants have been authorised for transport vehicles or office equipment, other than computers, whether used by manufacturing or other industry.

Mr. Darling: No grants have been authorised in respect of vehicles other than those specifically provided for in the Industrial Development Act or for equipment other than computers which is to be used for general office purposes.

Mr. Campbell: Is the Minister aware that the withdrawal of investment allowances and the ineligibility for the grants of transport vehicles are especially painful

for areas like the north of Scotland, where transport is such an important factor in almost all industry and commerce?

Mr. Darling: What the hon. Gentleman is asking for is some kind of regional assistance. This is a matter that might well be considered, but it does not come within the scope of the Industrial Development Act.

Mr. J. H. Osborn: asked the President of the Board of Trade if he will estimate the cost of making an analysis of, and publishing, the value of capital projects for which investment grants have not been allowed under the discretionary clauses of the Industrial Development Act, the cost of publishing the number of applications that have been refused, and the reasons for such a refusal.

Mr. Darling: No, Sir. I hope to be able to provide in July statistics for most of the claims received in the first quarter. These will show by broad categories the value of the expenditure on which grant was claimed and the amount which qualified for grant, but to extract from thousands of applications details of individual items disallowed and the reasons in each case for refusal would be a formidable and costly operation of limited use.

Mr. Osborn: Is there not considerable confusion as a result of replacing allowances by discretionary grants? Will the Minister publish the criteria for acceptance and rejection, as was promised during the passage of the legislation? Will the Minister clear up those areas where there is confusion—for instance, what is and what is not a computer?

Mr. Darling: There is no confusion about this. In any case of confusion we will be willing to give all the help we possibly can to clear it up. The information that the hon. Member is asking for has been widely and freely provided to industry and, so far as we know, there is no industrial enterprise that has not got the information.

Portuguese Cotton Goods (Imports)

Mr. Robert Howarth: asked the President of the Board of Trade if he is aware that certain British importers of Portuguese cotton goods are threatening to take legal action against the Portuguese


cotton industry on the grounds that there has been non-delivery of outstanding orders; and if he is satisfied that the agreement reached between Her Majesty's Government and the Portuguese Government limiting cotton imports into the United Kingdom is working effectively.

Mr. Jay: I have seen reports of difficulties of this kind, but on the general question of imports from Portugal I would refer my hon. Friend to the reply I gave to my hon. Friend the Member for Oldham, West (Mr. Hale) on 15th March.—[Vol. 743, c. 471–2.]

Mr. Howarth: We appreciate the protection which has been given by the present Government, but will my right hon. Friend now take steps to ensure that the protection covers the problem of a greater degree of categorisation and introduce also, where possible, particularly with reference to Portugal, for example, a quarterly import quota system to prevent bunching at a particular time of the year?

Mr. Jay: On the question of the main global quota on textile imports, we cannot go back, in the middle of the period, on the agreement which we have already reached. As regards Portugal, I am in consultation with Portuguese Ministers. If my hon. Friend looks at the figures, he will see that, as I predicted, textile imports from Portugal have been falling in recent months.

Sir Frank Pearson: Can the right hon. Gentleman give the House details of the agreement which he has been able to reach with Portugal, or, if he cannot tell us now, when will he be able to inform us?

Mr. Jay: No, Sir. I have already said all that it is wise to say if the objectives, which the hon. Gentleman has as well in mind as I have, are to be served.

Imported Textile Goods (Labelling)

Mr. Robert Howarth: asked the President of the Board of Trade if his Department will prosecute those who contravene the Merchandise Marks Act, 1926, by falsely labelling imported textile goods until such time as the proposed Protection of Consumers (Trades Descriptions) Bill becomes law and protects

consumers by demanding accurate and comprehensive labelling.

Mr. Darling: The Board of Trade is ready to consider any complaints that goods have been misdescribed contrary to the Merchandise Marks Act and, in appropriate cases, to investigate with a view to prosecution.

Mr. Howarth: I thank my right hon. Friend for that reply, but I remain a little puzzled. Is he aware that the Retail Trading Standards Association claims to undertake many prosecutions under the Merchandise Marks Act but, because of its limited financial resources, is not able to investigate a great number of contraventions? Could not the Board of Trade take over the prosecution of people who are at present getting away with deluding the public?

Mr. Darling: Under the Merchandise Marks Act, anyone may prosecute, and the Retail Trading Standards Association has been extremely vigilant and useful in this regard. I have discussed the matter which my hon. Friend raises with the director of the Association, and we are both aware that the Bill which we have in mind, the Protection of Consumers Bill, will lead to the satisfactory conclusion which all of us want.

Mr. Bellenger: When is the new Bill likely to be introduced in this House?

Mr. Darling: That question should be directed to other quarters.

Mr. Patrick Jenkin: As the Bill was announced in the Queen's Speech of 1964, is it not time we had it?

Mr. Darling: The hon. Gentleman has not kept up to date. It was introduced in another place, and it went through another place. We are now waiting to introduce it again in this place.

Trading Stamp Act

Mr. J. H. Osborn: asked the President of the Board of Trade whether he is satisfied with the operation of the Trading Stamp Act; and whether he will make a statement.

Mr. Darling: I have no evidence to suggest that the present law on this subject is unsatisfactory.

Mr. Osborn: I am grateful for that reply by the right hon. Gentleman, who greatly helped in bringing the Act to the Statute Book. Have the provisions of Section 1 been complied with? Second, are the provisions dealing with advertisements, display in shops and catalogues being complied with, and who is responsible under Government auspices for seeing that the Act generally is complied with?

Mr. Darling: The Act lays no duty of inspection or enforcement on the Board of Trade. Complaints, if they are likely to lead to prosecution, should be made to the police, except as regards the matters covered by Section 1(2) of the Act relating to the accounts of private companies and the like. The hon. Gentleman will have noted that we have had to amend the Companies Act in order to take account of that side of the Trading Stamp Act.

Commonwealth Foodstuffs (Exports)

Mr. Bruce-Gardyne: asked the President of the Board of Trade what steps he is taking to renegotiate long-term agreements with Commonwealth foodstuffs exporting countries governing access to the United Kingdom market, in view of Her Majesty's Government's decision to apply for membership of the European Economic Community.

Mr. Jay: No question of need to renegotiate anything arises at the present time.

Mr. Bruce-Gardyne: But would the President of the Board of Trade agree that some of these agreements last into the 1970s? Does his reply indicate that he does not think that there is a chance of the Government's succeeding in their application to join the Common Market, or is he merely trying to see that they do not succeed?

Mr. Jay: My answer implies no more than it said. I have several times discussed this problem with my colleagues in the Australian Government and they have agreed that until the Kennedy Round negotiations reach a conclusion, as they have, and the application by the United Kingdom to join the E.E.C. has been considered, there is nothing to be gained in our renegotiating the agreements with

Australia. But when both these uncertainties have been removed, we shall be able to proceed to make further arrangements.

European Economic Community

Sir J. Eden: asked the President of the Board of Trade (1) what measures he now proposes to take to help British industry to prepare for the increased competition it will encounter in the event of the United Kingdom joining the Common Market;
(2) what assessment he has made as to which sections of British industry will be most affected in the event of the United Kingdom joining the Common Market.

Sir J. Langford-Holt: asked the President of the Board of Trade for which industries and trades special arrangements will have to be made as a result of British membership of the European Economic Community.

Mr. Jay: The Government have already adopted a wide variety of measures to assist the efficiency and competitiveness of British industry, and these will be helpful in the event of our joining the European Economic Community. The effects of entry on particular sectors of British industry will, of course, depend upon the terms of any agreement reached.

Sir J. Eden: Has not the right hon. Gentleman made any special study of the likely impact of British membership of the Common Market on certain sections of British industry? Is he taking no special steps to try to anticipate the day when we join the Common Market by trying to strengthen the competitiveness of British industry?

Mr. Jay: Yes, Sir. We are taking a great many steps, including the National Productivity Conference which I should be attending at this moment if I were not answering Questions here. All these steps will tend to enhance the competitiveness of British industry, which is highly desirable whether we join the E.E.C. or not.

Sir J. Langford-Holt: Can the right hon. Gentleman not go further than that? Both he and his right hon. Friends have said from time to time that special arrangements must be made for certain


industries. Would he not make clear which these industries are?

Mr. Jay: Any special arrangements affecting particular industries will, of course, emerge only in the course of negotiations, and unless and until those negotiations take place it is impossible to give precise answers about them.

Sir J. Eden: With particular reference to Question No. 25, will the right hon. Gentleman say whether the I.R.C. is making any special study of this point?

Mr. Jay: The I.R.C. is engaged on discussions with industry about greater efficiency in particular industries, and in the course of those discussions it will certainly take into account—so far as is possible in view of the uncertainties—the possibility of the United Kingdom joining the E.E.C.

United Kingdom and Common Market Countries (Overseas Investments)

Mr. Stratton Mills: asked the President of the Board of Trade what was the amount of direct United States investment in Great Britain in each of the last three years and from Organisation for Economic Co-operation and Development or other sources; and what was the amount of United States investment in the Common Market countries in the same period.

Mr. Jay: As the Answer contains a large number of figures, I will, with permission, circulate it in the OFFICIAL REPORT.

Mr. Stratton Mills: Do these figures show that the United Kingdom has fallen behind in its share of American investment? Is there any evidence to suggest that, if this country were successful in entering the E.E.C., industrial investment by the Americans in this country, particularly in development areas, would show a substantial increase?

Mr. Jay: All the figures show that in recent years there has been a very large investment in this country by American industry. I would not wish to enter into hypothetical questions about the future.

Mr. Hugh Jenkins: If the wish of the hon. Member for Belfast, North (Mr. Stratton Mills) were fulfilled, would it not increase the degree of American control over British industry? Would not this

be the opposite of what hon. Members opposite wish?

Mr. Jay: I cannot say, because I am not quite sure what the wish is of the hon. Member for Belfast, North (Mr. Stratton Mills).

Mr. Patrick Jenkin: Does not the right hon. Gentleman recognise that the wish of the hon. Member for Putney (Mr. Hugh Jenkins) is being frustrated by the double taxation arrangements whereby it is more profitable for an American company to invest in this country than it is for a British company?

Mr. Jay: At present fortunately a great many companies, both American and British, are investing in this country.

Following is the information:

The figures are taken in part from British, and in part from United States statistics, which are compiled on different bases. For investment in the United Kingdom, the United States figures differ from ours, principally because a deduction is made in respect of investment which is in turn made overseas by the British subsidiaries of United States companies, and because transactions may be recorded in different years.

OVERSEAS PRIVATE DIRECT INVESTMENT IN THE UNITED KINGDOM*


(Board of Trade statistics)


£ million


Country or area of investor
1963
1964
1965
1966


United States†
104
116
145
…


Other member countries of OECD
55
43
52
…


Other countries
1
2
-8‡
…


Total
160
162
189
224§


*Excluding investment in the oil and insurance industries.


†Including Panama.


‡Net disinvestment.


§Provisional.


… = Not available.

UNITED STATES PRIVATE DIRECT INVESTMENT OVERSEAS


$million


Investment in
1963
1964
1965


United Kingdom
124
206
324


Common Market Countries
588
807
814

Source: U.S. Department of Commerce.

Manufacturing Industry (Earnings)

Mr. Bruce-Gardyne: asked the President of the Board of Trade if he will invite the National Economic


Development Council to undertake a study of the correlation between the comparative rates of increases in recent years in earnings in manufacturing industry in the United Kingdom, France, Germany, Italy, Sweden and Japan and the changes in those countries' respective shares of world exports of manufactures over the corresponding period.

Mr. Jay: We shall shortly be discussing in the National Economic Development Council the influence on our export performance of various factors, including relative changes in earnings in manufacturing industry in this and other countries.

Mr. Bruce-Gardyne: Does not the right hon. Gentleman agree that the calculations in the latest issue of Economic Trends suggest that there is no correlation between comparative rates of wage and salary inflation in different countries and export performance? Will he draw that to the attention of the First Secretary of State?

Mr. Jay: I would not go so far as to say that there is no correlation but a number of other factors, including efficiency of management, marketing and so on, are extremely important in themselves in determining export trends.

Treaty of Rome (Film Industry)

Mr. Hugh Jenkins: asked the President of the Board of Trade what restrictions, quotas or protections, at present operative in the film industry, are proposed by Her Majesty's Government for abolition under the Treaty of Rome.

Mr. Jay: None, Sir.

Mr. Jenkins: If, unhappily, our application were successful, would not the situation be that we should then be forced to remove the protections which at present have the effect of preserving an independent British film industry, such as it is?

Mr. Jay: I am advised that this is not the case but if my hon. Friend has evidence to the contrary I should be glad to examine it.

Development Areas (New Industries)

Mr. William Hamilton: asked the President of the Board of Trade in view of the continued underlying trend

towards increasing unemployment, what plans he has for establishing new publicly-owned and controlled industries in development areas.

Mr. Jay: I have already stated that the vigorous application of my powers under the Industrial Development and Local Employment Acts provides the best means of helping the development areas, and I have recently announced details of a large new programme of publicly-owned advance factories, following four others launched since October. 1964.

Mr. Hamilton: Is my right hon. Friend aware that, while we appreciate what has been and is being done in the development areas, nevertheless there was a specific commitment by the Labour Party in its last election manifesto to this kind of provision? Is he aware that differentiation between the respective development areas and others will not be solved until we take these additional measures?

Mr. Jay: Yes; but the responsibility of my Department consists in building publicly-owned factories in development areas, including advance factories, quite a number of which, by accident, have gone to my hon. Friend's constituency. If my hon. Friend is interested in establishments managed by the nationalised industries, which I should welcome, he should address his question to those of my right hon. Friends responsible for the industries concerned.

Sir K. Joseph: Is the right hon. Gentleman aware that while we deplore the breaches of many of the election pledges of right hon. Gentlemen opposite, we are very glad that they have broken this promise?

Mr. Leadbitter: My right hon. Friend will be aware that hon. Members on this side of the House are very appreciative of the vast amount of work which has been done in the special areas, but he should remember what my hon. Friend the Member for Fife, West (Mr. William Hamilton) said about the Government's promise. In addition to the advance factory programme, we would like Government action to provide the right kind of industries for the development areas and not merely factories open to any kind of tenant.

Mr. Jay: Yes, but what people want in these areas is increased employment, if possible in industries which are likely to remain there for the long term, but in any case in any industry which is viable and can carry on in the immediate future.

Dame Irene Ward: Would it not be helpful if we had a Minister who could reply on what I would call the detailed aspects and not just skate from factories to nationalised industries and then from nationalised industries to the Ministry of Labour? We can never get a comprehensive answer on which we can assess the position and how we are getting on.

Mr. Jay: I always try to answer the Questions asked.

Mr. Bruce-Gardyne: Would not the Minister agree that from the answer which he gave me last week the number of jobs created by the present Government in advance factories is infinitesimal in Scotland? All the rest have stuck in the pipeline, about which his hon. Friend the Member for Fife, West (Mr. William Hamilton) and the Secretary of State for Scotland used to be so critical.

Mr. Jay: That is incorrect. The hon. Gentleman's mistake is that he fails to see the distinction between advance factories, other publicly-owned factories and private factory projects encouraged and assisted by the Board of Trade.

Mr. Bob Brown: We share the sentiments of my hon. Friends about the efforts of the Board of Trade, but it gives us no pleasure to see an advance factory standing empty for many months. Would not the Minister agree that we would have far better scope for attracting the type of industry we need in the development areas if we had direct State intervention?

Mr. Jay: I am sure that my hon. Friend knows that, of the advance factories completed in the last two years, a high proportion had been let by the time they were completed. The experiment has proved very encouraging.

Employment (Hartlepool)

Mr. Leadbitter: asked the President of the Board of Trade how many new jobs are expected to be provided in Hartlepool during the next year arising

from new factory units and extensions; and what other long-term plans he has for the area.

Mr. Darling: No precise estimate is possible. Estimates given in the three years 1964 to 1966 by applicants for industrial development certificates in the Hartlepools and West Hartlepools Employment Exchange Areas for the additional employment when their projects are complete and fully manned, averaged about 1,800 a year. Hartlepool will continue to benefit from its inclusion in the Northern development area.

Mr. Leadbitter: Will my right hon. Friend bear in mind that in three years the unemployment level in Hartlepool has fallen from 12½ per cent., the highest in the United Kingdom, to about 5·6 per cent. this month? We appreciate the Government's efforts to bring about this pleasing result, but will my right hon. Friend continue this special interest and, following what has been said earlier today, consider direct Government intervention to get the right kind of industry into the right kind of place?

Mr. Darling: We shall do all we possibly can to persuade industrialists to consider Hartlepool, which has some great advantages for industrial development. Direct Government intervention is another question and would require very careful consideration.

Investment Grants (Kingston upon Hull)

Mr. Wall: asked the President of the Board of Trade if he will make an order under the Industrial Development Act, 1966 to implement, as far as the city of Kingston upon Hull is concerned, the proposal made by the Yorkshire and Humberside Economic Planning Council that investment grants should be payable in the region at a level half-way between that of the present development area and non-development area grants.

Mr. Jay: No, Sir, I do not believe this is the right policy for meeting the problems of Kingston upon Hull.

Mr. Wall: Does not the right hon. Gentleman agree that there is a great gap between the treatment of industries inside the development areas and the treatment of those outside? Is there not


a case for some middle treatment of places like Kingston upon Hull which do not come up to the criteria required for a development area?

Mr. Jay: The hon. Gentleman does not appreciate that middle treatment is now being given to these areas. In an area like Kingston upon Hull we follow an I.D.C. policy which is completely different from that which we follow in the Midlands or the South-East, and it is very similar to what we follow in the development areas.

Mr. Edwin Wainwright: Is my right hon. Friend aware that because of emigration many grey areas are being formed in the Yorkshire and Humberside region, and will he therefore have some consultations with the local authorities of those areas to ensure that the grey areas are removed?

Mr. Jay: Yes, Sir. I did that last week.

Chipboard

Mr. Buchanan-Smith: asked the President of the Board of Trade if he will take steps to prevent the dumping of chipboard in the United Kingdom; and if he will make a statement.

Mr. J. E. B. Hill: asked the President of the Board of Trade what action he is taking to avert damage to the expansion of the home chipboard industry and to the national investment in forestry caused by the rising imports of subsidised foreign chipboard.

Mr. Brewis: asked the President of the Board of Trade to what extent imports of chipboard have increased in the last year; and what steps he now intends to take to protect the home industry, in view of recent increases in imports.

Mr. Jay: I have nothing to add to the reply given to the hon. Member for Moray and Nairn (Mr. G. Campbell) on 12th June.

Mr. Buchanan-Smith: Does the right hon. Gentleman recognise the great difficulties which face manufacturers of chipboard in this country when dumping comes from Iron Curtain countries? Is he aware that great damage is being done to the manufacturing industry in this

country and also to growers and to employment prospects in areas such as Scotland?

Mr. Jay: I appreciate the problems. There is a difficulty when we are concerned with Iron Curtain countries, but we propose to discuss this matter with the countries concerned.

Earl of Dalkeith: Will the right hon. Gentleman undertake to carry out a very thorough investigation into the prices of material coming to this country, bearing in mind the enormous stake which the taxpayer has in forestry through the Forestry Commission?

Mr. Jay: Yes, Sir. We are investigating this now.

Mr. Patrick Jenkin: What steps did the right hon. Gentleman take at the recent trade talks with the Russians to bring about a situation in which Iron Curtain countries would give some sort of undertaking about exporting to this country at dumped prices? Does he recognise that it is extraordinarily difficult in these cases to prove dumping within the criteria of the 1956 Act? Can he not do more directly in the course of these trade negotiations to prevent this sort of thing from happening?

Mr. Jay: Yes, Sir. We will certainly bear this in mind, but it must also be remembered that the Soviet Union in particular is now placing much larger orders with British industry than for many years. Quite apart from anything else, we have to be satisfied that material injury is caused to the British industry before we introduce an anti-dumping Order. However, I will certainly examine what the hon. Gentleman has said.

Mr. J. E B. Hill: asked the President of the Board of Trade why, under his regulation, chipboard from Eire comes into this country duty free while British manufactured chipboard exported to Eire is subject to a 20 per cent. duty; and if he will establish parity of treatment.

Mr. Darling: Under the terms of the agreement establishing a Free Trade Area with the Republic of Ireland parity of treatment is being progressively achieved by annual reductions of 2 percentage points in the Republic's rate of duty on British exports of chipboard which currently stands at 18 per cent.

Mr. Hill: Although this situation is nothing like as serious to the British chipboard in dustry as the imports from Iron Curtain countries, it is none the less an anomaly. Will not the right hon. Gentleman agree that as long as this kind of disparity of treatment exists, it will be hard to get the natural growth of trade between this country and Ireland which we would like to see?

Mr. Darling: There is nothing anomalous in this. We have agreed with the Republic of Ireland gradually to reduce the tariff so that we can get parity of treatment in the course of time. We must have regard to the balance of interests. I think that this is a very good arrangement.

Textiles (North-East Scotland)

Mr. Hector Hughes: asked the President of the Board of Trade if he will state the extent and value of the textiles imported into and exported from northeast Scotland during the last five years; and if he will state what steps he is taking to increase that industry there.

Mr. Jay: Trade statistics are not compiled on a regional basis: but the Government's measures to assist industry in the development areas under the Local Employment Acts and the Industrial Development Act are available to the textile industry in north-east Scotland.

Mr. Hughes: I thank the President of the Board of Trade for what he has already done for Aberdeen. Is there not a good market for textiles straight across the North Sea in Scandinavia, Denmark and North Germany, and will my right hon. Friend exploit that market?

Mr. Jay: Yes, Sir. That is one of the great assets which north-east Scotland enjoys, together with its representation by my hon. and learned Friend.

Advance Factories

Dame Irene Ward: asked the President of the Board of Trade if he will publish the full history of Government advance factories built since the first one, giving the place, the number of employees provided for in each one, the occupants to whom the factories were let, the number of times the occupancy has changed, the cost of each factory and the present position of each factory.

Mr. Jay: I do not consider that I would be justified at the present time in undertaking a research project of this kind covering, as it would, factories constructed over the last 25 years.

Dame Irene Ward: Is the right hon. Gentleman aware that this is just the point, and that we cannot get at the facts? Will he please look at what the Minister of Health has done in the way of analysis, and do the same, so that we may know whether we have made any progress?

Mr. Jay: The relevant facts are pretty well known, and I assure the hon. Lady that it is our intention to continue with the efforts that we have been successfully making to increase industrial development on the North-East Coast, on Tyneside in particular.

Oral Answers to Questions — SHIPPING

Suez Canal (British Ships)

Sir J. Langford-Holt: asked the President of the Board of Trade why no instructions have been issued to the masters of British ships passing through the Suez Canal when these are searched for goods in transit for Israel.

The Minister of State, Board of Trade (Mr. J. P. W. Mallalieu): In our judgment none was necessary and British shipowners agreed with this judgment.

Sir J. Langford-Holt: Does the Minisster of State agree that this right has already been exercised by Egypt on at least one occasion against a British ship? Have the Government any views on this? Should not he issue clear instructions as to what should happen in the event of this alleged right being exercised again?

Mr. Mallalieu: It was exercised three years ago and, after a very strong protest, the ship was allowed to proceed. We stand by the principle of freedom of navigation through the Canal.

Sir K. Joseph: Is the Minister of State saying that no instructions were given because existing instructions cover the situation completely, in which case what are those instructions, or does he accept unworthily some sort of impotence in this case?

Mr. Mallalieu: Not a bit. As I have already said, the one instance where this occurred was followed immediately by a sharp protest, and the ship was allowed to proceed.

Mr. Ian Lloyd: As it now appears to be Her Majesty's Government's policy to send a letter where in happier times in such circumstances we should have sent a cruiser, are the masters of British merchant ships now to understand that they cannot expect to receive protection from the Royal Navy on the high seas? Are the Government aware that this will probably lead to the arming of British merchant vessels in the Middle East and the Far East?

Mr. Mallalieu: I am quite certain that it will lead to no such thing. The way to protect British vessels on the high seas in times of peace is to ensure that international obligations are watched over.

Sir K. Joseph: The Minister of State did not answer my question about instructions. Is he saying that no instructions were issued because the present ones cover the situation? If so, which instructions cover the situation?

Mr. Mallalieu: Any ship which was stopped—there has been only one—would report that at once to us and we should follow up with a sharp protest, which was effective in the one instance that has occurred.

British Foreign-going Ships (Doctors)

Sir G. Nabarro: asked the President of the Board of Trade whether he is aware that, whereas Section 209 of the Merchant Shipping Act 1894 requires every British foreign-going ship with 100 or more on board to carry a qualified medical practitioner, foreign ships operating from British ports are subject to no such statutory requirement; and whether, in the interests of British nationals sailing in foreign ships, he will include appropriate provisions to remedy this state of affairs when introducing revisionary shipping legislation.

Mr. J. P. W. Mallalieu: I find that the requirements of other maritime countries are, in fact, broadly similar to those which apply to British foreign-going ships.

Sir G. Nabarro: First, do the Greeks conform to these requirements? Second, could the hon. Gentleman do something with travel agencies in this country advertising, particularly, cruises from British ports for which foreign ships carrying more than 100 passengers are used to warn would-be passengers and cruisers that there may be no doctor on board? Is not this a wise precaution?

Mr. Mallalieu: The Greek regulations provide that passenger ships must carry a doctor if they will be more than four days between ports. On the second point, the travel agents already have the information, and I agree that it would be extremely wise on the part of any intending passenger who is nervous about it to find out whether the ship on which he is proposing to sail has a doctor.

Leith Docks

Mr. Stodart: asked the President of the Board of Trade if he will reconsider the exclusion of Leith Docks from the development area; and if he will make a statement.

Mr. Darling: The boundaries of the development areas are regularly reconsidered, but we have no plans for altering the present boundaries.

Mr. Stodart: Can the right hon. Gentleman say why it was that the Minister of State for Scotland stated the other day that consideration was to be given to the inclusion of Leith Docks in the development area? Why cannot this be done? Will the right hon. Gentleman now consider not only Leith Docks but also Edinburgh and Leith as well?

Mr. Darling: There are two answers to that. The first is that the boundaries of development areas are regularly reconsidered. The second is that I am surprised that the hon. Gentleman has so little regard for the other areas of Scotland where there is heavy unemployment and where industrial development is far more greatly needed than in the Edinburgh area.

Mr. Patrick Jenkin: Does not the right hon. Gentleman recognise that the seven-year guarantee given with the regional employment premium is severely curtailing the power of the Board of Trade to re-schedule development areas?

Mr. Darling: That is another question and we will consider it.

Mr. Clark Hutchison: Are the boundaries being considered now or not?

Mr. Darling: I said that they are always being reconsidered. Obviously there probably will be changes in the boundaries in the course of time, but this is not the time to alter the present boundaries.

Q4 Liner

Mr. Kenneth Lewis: asked the President of the Board of Trade if he will make it a condition of continued financial assistance to the Q4, that, the "Queen Elizabeth" be kept in service for at least a limited period.

Mr. Wingfield Digby: asked the President of the Board of Trade whether, in view of the adverse effect which withdrawal of the Queen liners will have on the prestige of British shipping, he will refuse further financial assistance to the Q4 until the company have reconsidered the withdrawal of the Queens; and what representations he made to the United States Government about the application of the new United States law on fire safety to the Queens.

Mr. J. P. W. Mallalieu: I am not prepared to interfere with the commercial decision reached by the owners. The new United States safety regulations were dealt with in the reply given to the right hon. Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) on 8th February. —[Vol. 740, c. 311–12.]

Mr. Lewis: Is the hon. Gentleman aware that over £1 million was spent on refitting the "Queen Elizabeth" last year? Since the subsidy was given to Cunard on the basis of maintaining the Atlantic run and since, in my view, until the Q4 is going it can only be run in on the Atlantic run by keeping the two ships going, should not the Government have something to say?

Mr. Mallalieu: No, I do not think so —not in the terms the hon. Gentleman is mentioning. Cunard must be in a position to pay its share of the costs of the new "Queen" and to maintain the present "Queens" on the run would,

in the company's commercial judgment, be a drain on its resources.

Mr. John Hall: Is it not becoming increasingly obvious that the Q4 is unlikely to prove profitable? What provision is the hon. Gentleman making to cover the potential loss?

Mr. Mallalieu: That is an assumption that should not be made. In its commercial judgment, Cunard thinks that the Q4 can be run profitably.

Mr. Boyd-Carpenter: The American fire regulations have been a major factor in the decision to lay up the "Queen Elizabeth". As British passenger shipping has a better safety record under our regulations than that of any other merchant navy, has not the time come for us to tell the Americans this in no uncertain terms?

Mr. Mallalieu: I agree that the British record on fire regulations has been extraordinarily good. I assure the right hon. Gentleman that very strong representations were made to the Americans about their regulations and that we secured some amendment. I do not think that the regulations in their amended form have any bearing on the decision of the Cunard Line.

Mr. Edward M. Taylor: asked the President of the Board of Trade what recent representations he has had from the Cunard Company regarding the financing of the Q4, which is under construction in the Clyde; and if he will make a statement.

Mr. Bence: asked the President of the Board of Trade what representations he has received from the Cunard Steamship Company respecting the increase in the cost of construction of the Q4; and what reply he has sent.

Mr. Jay: The company have approached me and discussions are in progress. I am not yet in a position to make any statement.

Mr. Taylor: Is the right hon. Gentleman aware that the recent statement by Cunard caused great anxiety on Clydebank? Is he aware that, apart from an oil rig, the Q4 is the only contract and that its cost escalation is as much the Government's responsibility as it is that


of George Brown—[Laughter.]—John Brown? Will he at least give an assurance that, having committed themselves so far, the Government will see that this ship is finished?

Mr. Jay: I always thought that it was John Brown on the north bank of the Clyde, but we are very well aware of these anxieties. We are examining the company's point of view, and I had better not make a statement until we have reached a decision.

Sir Knox Cunningham: Is it true that the "Queen Elizabeth" is to be bought by a Japanese firm? What action does the right hon. Gentleman intend to take?

Mr. Jay: I should not like to answer that without notice. Perhaps the hon. and learned Gentleman will put down a Question about it.

Oral Answers to Questions — AVIATION

British European Airways (New Aircraft)

Mr. McMaster: asked the President of the Board of Trade when he expects to make a decision regarding the application of British European Airways to purchase a BAC211 aircraft.

Mr. Goodhew: asked the President of the Board of Trade what decision he haw now taken regarding the application of British European Airways to purchase BAC211 aircraft.

Mr. Jay: I expect to reach a decision within a few weeks.
The decision will turn not only on what will be the most economic fleet for B.E.A., on which I have only recently had a full study from the Corporation, but on practical and financial questions relating to the development and production of the chosen aircraft which I am discussing with my right hon. Friend the Minister of Technology.

Mr. McMaster: Is the right hon. Gentleman aware that irrespective of the decision on the airbus, it would be a tremendous advantage to British industry and technology to have an aircraft which is both built in Britain and equipped with a new engine designed and built in Britain? Will he, therefore, expedite this matter?

Mr. Jay: Yes, Sir, I entirely agree with the hon. Gentleman's objective. But there are some intricate technical and financial questions involved in the relation of the engine chosen for the airbus and the engine for other types of aircraft. That is why we are now intensively investigating the matter in consultation with B.E.A., Rolls-Royce and the other parties concerned.

Mr. Goodhew: Is it not a fact that this aircraft is to have a particularly silent engine? Would it not, therefore, have a great export market?

Mr. Jay: Among many other factors, the relative quietness of an engine is certainly an asset nowadays in any prospective aircraft.

Mr. Robert Howarth: Would my right hon. Friend, however, take great care, in that if he agrees to the finding of, I think it is, £100 million for the development of the BAC211, this would not only seem to rule out the prospect of a European airbus but might possibly draw us into the sort of error we have seen so many times before, where B.E.A. requirements ruled out the prospect of export sales?

Mr. Jay: The matter is not quite so simple as this because the question of whether or not it rules out the airbus depends on which engine is chosen for both. It is because this is rather intricate that we are taking a little time to investigate it thoroughly.

Mr. R. Carr: While we sympathise with the right hon. Gentleman over the complexities of this decision and its importance, can he assure us that there will be very thorough market surveys of the need of world markets for aircraft of different sizes and of the various times at which those demands are likely to arise?

Mr. Jay: Yes, Sir. We are certainly doing this work, which is extremely important, in consultation both with the authorities concerned in other countries and with the producers of both airframes and engines in the United Kingdom.

Mr. R. Can: asked the President of the Board of Trade whether it remains the policy of Her Majesty's Government that British European Airways should be limited in their re-equipment programme


to the purchase of British aircraft; and whether he will make a statement.

Mr. Jay: I have nothing to add to the reply I gave to my hon. Friend the Member for Bolton, East (Mr. Robert Howarth) on 11th May.—[Vol. 746, c. 270.]

Mr. Carr: Can the right hon. Gentleman assure us that he is very much aware of the great urgency of the position? When he spoke a few minutes ago about reaching a decision on the BAC211 within a few weeks does that also mean that he will be reaching a decision about the B.E.A. re-equipment programme in a few weeks?

Mr. Jay: We hope to reach a decision very soon on the whole remain instalment of B.E.A. re-equipment. As the right hon. Gentleman knows, we have already approved a major purchase of BAC111s.

Sir G. Nabarro: Will the right hon. Gentleman bear in mind during the final stages of his consideration of this vital problem that there will be very wide resentment throughout British industry, in aeronautics and engineering generally, if he decides to buy foreign aircraft for a British national European airline?

Mr. Jay: I there sympathise with the hon. and gallant Gentleman.

Sir G. Nabarro: I am not gallant.

Mr. Jay: The hon. Gentleman used to be.

Passenger and Freight Traffic

Mr. McMaster: asked the President of the Board of Trade whether he has sought estimates of the growth of passenger traffic likely to be carried by British nationalised and independent airlines on the basis of their present plans; how this compares with the estimates of the total growth of world traffic; and whether he is satisfied with the percentage of world traffic likely to be obtained by British operators.

Mr. J. P. W. Mallalieu: Estimates I have obtained indicate that on present plans British airlines are expecting their traffic to grow at about the same rate as is forecast by the International Civil Aviation Organisation for growth of world traffic. This seems to me satisfac-

tory and in keeping with recent experience, but I am sure that the airlines will seek as great a share of it as is commercially worthwhile.

Mr. McMaster: Is the Minister satisfied with the efficiency of the highly protected State air corporations? Will he give the independents a better crack of the whip so that the spur of competition can improve the efficiency of our entire aircraft industry for the benefit of the country as a whole?

Mr. Mallalieu: The question of licensing on routes is in the first instance for the Air Transport Licensing Board, but I must point out that other countries designate only one airline per route.

Sir A. V. Harvey: Why is the right hon. Gentleman so complacent about this matter? B.O.A.C.'s share of traffic on the North Atlantic route is steadily declining and the American share is increasing. The Americans have at least two passenger operators, and we have one. Is not there a case for another independent operator on the North Atlantic?

Mr. Mallalieu: I think that there is no case for another independent operator on that route. But I assure the hon. and gallant Gentleman that we are not complacent about this. I am as anxious as anybody else that our share should be continually increased, and our airlines have been doing well.

Mr. R. Carr: Then why does the hon. Gentleman think that our share of this vital North Atlantic route is falling?

An Hon. Member: Especially when we have good aircraft.

Mr. Mallalieu: That is a question that I cannot answer off the cuff. There is a number of factors to do with inclusive tour charters which are affecting scheduled aircraft.

Mr. Ronald Atkins: Would my hon. Friend agree that B.O.A.C. has already rescued one transatlantic operator that went bust, at great cost to the Corporation?

Mr. McMaster: On a point of order. In view of the unsatisfactory nature of the reply, I beg to give notice that I shall raise this matter at the earliest opportunity on the Adjournment.

Mr. Peter Mills: asked the President of the Board of Trade what are his estimates of the growth of freight traffic likely to be carried by British European Airways on the basis of their present plans; how this compares with the estimate of total growth of air freight traffic within Europe; and whether he is satisfied with the percentage of this traffic likely to be obtained by British European Airways.

Mr. J. P. W. Mallalieu: Rather over 20 per cent. per annum, which accords with the general expectation of the rate of growth in Europe as a whole. I expect B.E.A. to continue to be able to secure their full share of the traffic offered that is commercially worth while.

Mr. Mills: Is this enough? Are we not losing a lot of this trade to competitors such as K.L.M.? Surely B.E.A. should be encouraged to obtain a much larger share of the freight traffic.

Mr. Mallalieu: The record of B.E.A. in obtaining a share of the freight traffic in Europe is first-class. It is much the largest freight carrier.

Mr. Peter Mills: asked the President of the Board of Trade what are his estimates of the growth of passenger traffic likely to be carried by British European Airways on the basis of their present plans; how this compares with the estimate of total growth of air passenger traffic within Europe; and whether he is satisfied with the percentage of this traffic likely to be obtained by British European Airways.

Mr. J. P. W. Mallalieu: B.E.A.'s present plans are based on the expectation that their passenger traffic will increase by about 10 per cent. a year over the next five years. A similar rate of growth has been forecast for all intra-European international traffic. I expect B.E.A. to be able to secure a satisfactory share of commercially worth while traffic.

Mr. Mills: Again, is this really enough? Surely, to help maintain this passenger traffic, is it not more important that frequent services should be provided rather than a large airbus—indeed, feeder services from every area, particularly the South-West?

Mr. Mallalieu: These are certainly points to be borne in mind. But again I must assert that B.E.A. has done extremely well.

Mr. R. Carr: Would not the hon. Gentleman agree that the growth of British air transport is tied in closely with having a comprehensive plan for airport development for the whole country?

Mr. Mallalieu: That is one of the very important considerations.

Mr. Fortescue: asked the President of the Board of Trade whether he is aware that the United Kingdom's share of world scheduled air transport has steadily decreased since 1960; and whether he will take steps to counteract this trend by encouraging competition among British carriers and by improving the efficiency of the air transport licensing system.

Mr. J. P. W. Mallalieu: The United Kingdom's share has not in fact decreased since 1960 and the second part of the Question, therefore, does not arise. Possibly the hon. Member has in mind statistics which, for the earlier year, include traffic carried by airlines of countries for which the United Kingdom is no longer responsible. I will gladly send him the relevant information.

Mr. Fortescue: I thank the Minister for that answer. Would he not agree that the terms of reference enshrined in the legislation of the Air Transport Licensing Board mitigate against competition among British carriers and should not something be done about it?

Mr. Mallalieu: It is not merely the terms of the Board. On international practice we have to deal with foreign Governments.

Mr. Lubbock: Is the hon. Gentleman aware that, contrary to the assertion of the Chairman of B.O.A.C., our share of trans-Atlantic traffic has been declining? The figures are available in the United States, if not here.

Mr. Mallalieu: This is the subject of an earlier Question and is known. It is also the subject of Notice of an Adjournment debate.

British European Airways pilots (Extra Duties)

Mr. Goodhew: asked the President of the Board of Trade why he has refused permission for British European Airways pilots to work extra hours within the maximum laid down for safety reasons, in order to meet the traffic demands foreseen during the summer months.

Mr. J. P. W. Mallalieu: I have not refused permission. The pilots' request, which relates only to remuneration for extra duties, has now been examined and I have agreed that in the special circumstances of this case the payments may be made.

Mr. Goodhew: Is the Minister aware that the House will receive that news with great satisfaction?

Turnhouse Airport, Edinburgh

Mr. Stodart: asked the President of the Board of Trade how many aircraft were diverted from Turnhouse Airport, Edinburgh, because of cross-winds during 1966; and by what date in this year he estimates that that number will be exceeded.

Mr. J. P. W. Mallalieu: The number of air transport flights diverted or cancelled because of crosswinds during 1966 was 65. This number has already been exceeded in 1967 because of the exceptional weather in February and March.

Mr. Stodart: Is not that a most deplorable reply in view of the utter lack of consideration given by the Government to the need for an extra runway at Turn-house? When are the Government going to get down to giving this important airport proper facilities?

Mr. Mallalieu: With the present Government, Edinburgh Corporation has been in almost continuous discussion about the future of the airport. We are hoping to reach a final decision with the Airports Authority. I agree with the hon. Gentleman that it is necessary to do something about Turnhouse.

Miss Harvie Anderson: Is the hon. Gentleman aware of the number of occasions that aircraft only got in at Turn-house at the second or third attempts

in high gust wind conditions? In view of the narrowness of the safety margin in these instances, will he please get this runway quickly before there is another disaster?

Mr. Mallalieu: I assure the hon. Lady that no risks whatever are taken about getting into this airport. That is why there are so many diversions.

London Airport, Heathrow (Cross-runways)

Mr. Worsley: asked the President of the Board of Trade whether he will make a statement about the increased use of cross-runways at London Airport (Heathrow).

Mr. J. P. W. Mallalieu: It is doubtful whether greater use of the north-east/ south-west runways at Heathrow would make any significant overall reduction in noise disturbance, but investigations into this complex matter are continuing and should be completed shortly.

Mr. Worsley: Will the hon. Gentleman pursue these investigations with energy? The great majority of flights into London Airport (Heathrow) come over the centre of London causing the maximum annoyance to the maximum number of people. Would it not help to abate aircraft noise by using these other runways?

Mr. Mallalieu: That statement is not strictly accurate. If we used the cross-runways I am sure we would be shifting some of the burdon on to Ealing and Southall and other places. We are trying to find the best way of dealing with this problem.

Mr. Hugh Jenkins: Is not the only solution to the problem to remove the bulk of aircraft landing to a place other than London (Heathrow)—preferably not Stansted?

Aircraft Noise (Borough of Kensington and Chelsea)

Mr. Worsley: asked the President of the Board of Trade whether he will arrange for the level of aircraft noise in the Royal Borough of Kensington and Chelsea to be monitored during the summer.

Mr. J. P. W. Mallalieu: An extensive programme of measurements of aircraft noise levels will be made at a number of sites in the course of this summer, in order to establish the pattern of noise disturbance in all areas affected by Heathrow traffic including the Royal Borough of Kensington and Chelsea.

Mr. Worsley: Is the Minister aware how much that statement will be welcomed? Anything he can do to impress on the Airport Authority that the problem of aircraft noise is not one just round the airports but wider than that, would be very welcome.

Mr. Mallalieu: I understand that point.

Aircraft Accident (Munich)

Mr. Fortescue: asked the President of the Board of Trade whether he has yet obtained a reply from the German authorities regarding certain technical matters arising from the conclusions of the Second Commission investigating the Munich air disaster in February, 1958.

Mr. Dobson: asked the President of the Board of Trade what reply has been received from the German Government concerning the technical points put to them by his Department following the receipt of the Second Report of the aircraft disaster at Munich Airport on 6th February, 1958; whether the report is now available for publication; and if he will make a further statement on this subject.

Mr. J. P. W. Mallalieu: The German Federal aviation authorities have agreed there should be discussions with the German experts, and these are due to commence today. The report will not be published until the discussions have been completed and their implications considered.

Mr. Fortescue: On 15th March this year the Minister told the House that he was pressing very hard for this information. Has it taken three months to get to this unsatisfactory state of affairs?

Mr. Mallalieu: It has taken a long time, but it is starting today.

British European Airways (Internal Flights)

Mr. G. Campbell: asked the President of the Board of Trade if he will give a direction to British European Air-

ways to advertise, or otherwise give publicity to, their new schedule of internal flights.

Mr. J. P. W. Mallalieu: No, Sir. This is a commercial matter for the management of B.E.A.

Mr. Campbell: Does the Minister realise that although new extra flights in Scotland have started from 1st April, it is taking a long time for many people who would use them to learn of the existence of these flights? Is it not Government policy that these services should be used as much as possible?

Mr. Mallalieu: It certainly is, but my information is that a Press notice was put out a week before the start of the new schedule and that there were follow-up advertisements after that.

Tayside (Airport Facilities)

Mr. Buchanan-Smith: asked the President of the Board of Trade to what extent he is having consultations with those conducting the Tayside study regarding the provision of adequate airport facilities for that region; and if he will make a statement.

Mr. J. P. W. Mallalieu: None at present. The Tayside Study is still at a formative stage and the precise terms of reference are being considered by my right hon. Friend the Secretary of State for Scotland but we shall, of course, be ready to co-operate on the aerodrome aspects in due course.

Mr. Buchanan-Smith: Is the hon. Gentleman aware that the present situation on Tayside, where we have to rely on an airstrip and on a Ministry of Defence airfield, is thoroughly unsatisfactory? In view of the industrial development of this area, will he do all he can to bring forward definite proposals for proper facilities as soon as possible?

Mr. Mallalieu: I appreciate that it is most unsatisfactory and that we cannot wait until the Tayside study is complete, which is why we are carrying on with other investigations.

Civil Aircraft (Certificates of Maintenance)

Mr. Bidwell: asked the President of the Board of Trade what plans he has for changing the regulations at present


requiring certificates of maintenance for civil aircraft to be signed by licensed aircraft maintenance engineers.

Mr. J. P. W. Mallalieu: The Air Registration Board, who are my advisers in airworthiness matters, have suggested that the regulations should be expanded to allow certificates of maintenance to be issued by approved maintenance organisations, and this suggestion is being examined.

Mr. Bidwell: Will my hon. Friend bear in mind that the licensed aircraft maintenance engineers hold well considered views? Does he recall the question which I put to his right hon. Friend after the statement on the recent air crashes? Will not the Department accept that this is not the time in any way to diminish present aircraft maintenance standards for safety?

Mr. Mallalieu: This is certainly not the time to diminish standards and if there were any question of that being the effect, we should reject the proposals.

GIBRALTAR

The Minister of State for Commonwealth Affairs (Mrs. Judith Hart): With permission, Mr. Speaker, I wish to make a statement on Gibraltar.
The House will recall that on 20th December, 1966, the General Assembly of the United Nations adopted a Resolution, No. 2231 (XXI), calling upon Britain and Spain to continue their negotiations about Gibraltar, taking into account the interests of the people of Gibraltar and asking Britain, in consultation with Spain, to expedite the decolonisation of Gibraltar. Spain voted for this Resolution. So also did Britain, with the statement, by our Permanent Representative at the United Nations, that Britain could never agree that decolonisation would mean the incorporation of Gibraltar into Spain against the wishes of its people, and also that nothing could prejudge the question of the type of decolonisation which would best fit the circumstances of Gibraltar.
We have been considering our policy towards Gibraltar in the light of this Resolution. In doing so we must have regard to the relevant provisions of the Charter of the United Nations, in par-

ticular Article 73 which expresses the principle that the interests of the inhabitants of a non-self-governing territory are paramount. We must also have regard to our obligations under the Treaty of Utrecht.
As the House knows, we duly arranged to hold talks with the Spanish Government in pursuance of the U.N. Resolution. The first meeting between delegations of the two countries was to have taken place in London in April. We greatly deplored the action of the Spanish Government in announcing, on the eve of the talks, new restrictions plainly aimed against the economy of Gibraltar. Such action was in clear conflict with the terms of the General Assembly's Resolution, which regretted the occurrence of acts which had prejudiced the progress of the previous Anglo-Spanish negotiations. The talks were postponed, as the House knows, in order to enable us to consider the new situation. As hon. Members know, we raised the matter in the International Civil Aviation Organisation and have also attempted to resolve the problem in bilateral talks with the Spanish Government.
We are taking steps to bring the matter before the Council of I.C.A.O. once more, this time as a dispute under Article 84 of the Chicago Convention. I should prefer not to go further at this stage into the international aspect of the problem, which is primarily a matter for my right hon. Friend the Foreign Secretary.
But we should not be deterred by this dispute or by the difficulties which Spain has made over the holding of talks from pursuing the objectives of the United Nation's Resolution.
I must repeat Her Majesty's Government's firm belief that decolonisation cannot consist in the transfer of one population, however small, to the rule of another country, without regard to their own opinions and interests. We therefore think that the next step in pursuance of the United Nations Resolution should be to give the people of Gibraltar an opportunity to express their views, by a formal and deliberate act, on what would best serve their interests.
We have accordingly decided that a Referendum should be held in Gibraltar in which the people of Gibraltar should be invited to say which of the following


alternative courses would best serve their interests:
A. To pass under Spanish sovereignty in accordance with the terms proposed by the Spanish Government to Her Majesty's Government on 18th May, 1966; or
B. Voluntarily to retain their link with Britain, with democratic local institutions and with Britain retaining its present responsibilities.
If the majority of the people of Gibraltar vote in favour of the first alternative, we will be ready to enter into negotiations with the Spanish Government accordingly.
If the majority of the people of Gibraltar vote in favour of the second alternative, we will regard this choice as constituting, in the circumstances of Gibraltar, a free and voluntary relationship of the people of Gibraltar with Britain. We will thereafter discuss with representatives of the people of Gibraltar appropriate constitutional changes which may be desired.
If the majority vote for the second alternative, provision will also be made for the people of Gibraltar to retain the right at any future time to express by a free and democratic choice the desire to modify their status by joining with Spain, in which event we would be ready to approach the Spanish Government accordingly.
We attach great importance to the Referendum being held in conditions of complete impartiality. We want the people of Gibraltar to be able to think calmly where their interests lie and to express their choice free from pressures of any kind. We are bringing our intention to the notice of the Secretary-General of the United Nations and we should very much welcome the presence of any observer he might wish to send to Gibraltar during the Referendum proceedings.
We are ready to welcome an observer from Spain, too, and to give the Spanish Government facilities to explain their own proposals to the people of Gibraltar if they so wish. We also have in mind to invite observers from one or two other Commonwealth countries.
It is our intention to hold this Referendum as soon as suitable arrangements have been made for the registration of persons entitled to vote. These arrangements will necessarily take some time.

Our present expectation is that the Referendum will be held early in September.

Mr. Maudling: It is a little difficult to be sure of how far this statement carries us. Surely the Government have been proceeding on the assumption that the people of Gibraltar do not wish to become Spaniards? Surely this has never been seriously challenged? May I ask the hon. Lady two questions? First, are the Government now at last prepared to give the assurance that they have been so coy about, namely, that they will in no circumstances transfer sovereignty over Gibraltar to Spain against the wishes of the people?
Secondly, and equally important, what practical steps do the Government intend to take to deal with the severe economic pressure that has been put upon Gibraltar, particularly in the matter of flying rights?

Mrs. Hart: To take the first question, this is really already answered by the terms of the Referendum and the terms of my statement. What I have made clear is that, in that the United Nations Resolution places stress, and our Permanent Representative at the United Nations, in voting for the Resolution, placed even greater stress, upon the interests of the people of Gibraltar, it will be clear that we are determined that the interests of the people of Gibraltar should be paramount and that, therefore, it is right that they should decide what they believe their interests to be and where they believe their interests to lie.
On the right hon. Gentleman's second point, we are doing, as I think he knows, a great deal to assist the economy of Gibraltar at the moment. On the question of air restrictions, in practice there has been little or no interference with the travelling of passengers and tourists to Gibraltar, in spite of the air restrictions, and we very much hope that this situation will continue.

Mr. Maudling: I am sorry to press the hon. Lady, but this is a very important point. In answering the first question, she moved a little towards some of the ambiguous phrases used in the past by Ministers, namely, about the Gibraltar people expressing their own views, in their own interest. What we want is a categorical assurance that if it is clear that they do not wish to be transferred


to Spain they will not be transferred to Spain.

Mrs. Hart: If the right hon. Gentleman will read my statement carefully, what I said there, and I will repeat the relevant sentences, was:
If the majority of the people of Gibraltar vote in favour of the second alternative"—
namely, voluntarily to retain their link with Britain, with democratic local institutions and with Britain retaining its present responsibilities—
… we will regard this choice as constituting, in the circumstances of Gibraltar, a free and voluntary relationship of the people of Gibraltar with Britain.
That makes it clear what our intentions are.

Mr. John Lee: My hon. Friend has made a very satisfactory statement. May I ask two questions? First, if the Referendum is in favour of association with the United Kingdom, while I fully concede that the people of Gibraltar may wish to reconsider their decision in future, may we be assured that there will be no further going over this ground for at any rate a certain period—say, ten years as a minimum? Secondly—

Mr. Speaker: Order. Questions must be reasonably brief.

Mr. Lee: If the Spanish Government send observers, may we have an assurance that they will not be allowed to interfere with the running of the Referendum?

Mrs. Hart: Certainly they will not. As I have said, the whole intention is that this should be a completely impartial Referendum. If the Secretary-General is able to provide an observer from the United Nations, if the Commonwealth is able to provide one or two observers, and if Spain wishes to provide an observer, they will be strictly observers. There is no need for my hon. Friend or for right hon. and hon. Gentlemen opposite to tell me what the people of Gibraltar feel in their hearts. I am sure that what lies behind the feelings of the people of Gibraltar is not only the question of where their interests lie—whether in relation to Britain or in relation to Spain—but a number of considerations which bear on the systems of Government in Britain and in Spain.

Mr. Wall: If the people of Gibraltar decide on a British connection, there will then be constitutional discussions with the Gibraltar Government. Why cannot the hon. Lady go the whole hog in the Referendum and decide whether Gibraltar is to be integrated with Britain or have a close association with Britain and so end the present political turmoil in Gibraltar'?

Mrs. Hart: My impression is that one of the things which has understandably been very much concerning the people of Gibraltar, including many members of the Integration Party, whom I met on my recent visit to Gibraltar, has been the fear that there might be a loosening of the ties with Britain. I think that they will be content with the Referendum and with the assurance which I have given them that in any future discussions about constitutional changes in Gibraltar every shade of political opinion in Gibraltar will be fully consulted and involved. I think that they will be reasonably content with that.

Mr. Crawshaw: Is my hon. Friend aware that this decision will not be welcomed by the Spanish Government and that the possibilities are that there will be further threats and action taken against Gibraltar? Can she assure us that this new-found backbone will continue to be shown rather than a clean pair of heels as has been shown in the past?

Mrs. Hart: I do not know whether my hon. Friend is suggesting that I have been showing a clean pair of heels. I assure him that the undertakings which I have given to the people of Gibraltar, and the undertakings given in the House by my right hon. Friends the Foreign Secretary and the Chancellor of the Duchy of Lancaster, are that we will continue to stand by the people of Gibraltar. I see no reason to assume what the Spanish reaction to my statement today will be. What is clear is that we are acting in pursuance, as we are bound to do, of the United Nations Resolution, which calls upon us to continue our negotiations, but to take into account the interests of the people of the territory. What we are now proposing is fully in pursuance of that Resolution for which both we and Spain voted.

Sir A. V. Harvey: Since it is highly likely that Spain will disregard any decision of the United Nations, why does the hon. Lady place so much reliance on the United Nations when it seems quite incapable of dealing with the most elementary matters elsewhere in the world?

Mrs. Hart: I think that we must recognise that the United Nations Charter is bound to govern the actions of any member of the United Nations Organisation. Article 73 states various things. We have the peculiar difficulty in this situation—and let us understand this clearly—of being bound to recognise Article 73, on the one hand, and of being bound to recognise the Treaty of Utrecht, however long ago it may have been drawn up, on the other hand. Thirdly, we must recognise the interests of the people of Gibraltar with whom we have such close associations. It was in recognition of all three factors that we came to our conclusion.

Mr. Palmer: Would my hon. Friend agree that this excellent proposal for a Referendum will be a very useful object lesson to the Franco dictatorship on the workings of a free democracy?

Mrs. Hart: It is not for me to prejudge what conclusions may be drawn by the Government of Spain from the Referendum.

Sir Harmar Nicholls: Is the hon. Lady aware that in some quarters her statement will be looked upon as a weakness? It will give the appearance that we are covering up our responsibilities by pushing the Referendum forward. Therefore, will she use all the diplomatic power and contact which she has to let it be seen that, as her hon. Friend the Member for Liverpool, Toxteth (Mr. Crawshaw) said, we are at last showing some backbone?

Mrs. Hart: It is probably relevant to say that I have in the last few months, both here in London and in Gibraltar, been in very close touch with Joshua Hassan and Mr. Peter Isola and have every reason to believe that they will regard this as a reasonable next step to take. I have no fears that there will be in Gibraltar any inclination to regard this as a sign of weakness on the part of the British Government.

Mr. Colin Jackson: May I endorse my hon. Friend's statement that the people of Gibraltar will widely support the plea for a Referendum? Bearing in mind that there may be a United Nations observer and an observer from the Spanish Government, and since in the Malta Referendum a delegation was sent from the British Parliament, and as this matter affects the British Crown and British Parliament, might not a delegation of friends of Gibraltar be sent from this country for the Referendum?

Mrs. Hart: That is not a matter which has been considered. It is, no doubt, for the Commonwealth Parliamentary Association to consider that aspect. I am reasonably content that if we can get an observer from the Commonwealth and an observer from the United Nations, if the Secretary-General agrees, we shall ensure a completely impartial conduct of the Referendum.

Mr. David Steel: We particularly welcome the statement, since our suggestion was turned down by the Government. Who will organise the Referendum? Will it apply to all over 21 years of age? Exactly what does the hon. Lady mean when she talks about giving the Spanish Government facilities to outline their own proposals? Would she consider extending this constitutional innovation to the people of Scotland?

Mrs. Hart: I am reasonably satisfied that the arrangements as between Her Majesty's Government and the people of Scotland do not offend Article 73 of the United Nations Charter. Secondly, in terms of the Spanish explaining what their position is, at the moment we are basing alternative A on the offer which was made by Spain in May last year. We have made our statement of what alternative A will be, but if the Government of Spain wish to make any comment or observations on it we will be ready to listen to them. On the hon. Gentleman's first point, the Referendum will require an Order in Council defining its terms and the qualifications of voters and making provision for its administration. The Governor of Gibraltar will be responsible for its administration. He will act at his discretion and under the directions of Her Majesty's Government. This is essentially a British act of state.

Mr. Alfred Morris: May I assure my hon. Friend that there will be widespread approval of her statement throughout the country? What contingency planning has there been to deal with any intensification by Spain arising from this statement of its present interference with our flying rights?

Mrs. Hart: I can assure my hon. Friend that "contingency planning" is a phrase which has not been unknown to us in the last few weeks, but he will appreciate that it would not be wise for me to enter into detail as to what it might mean.

Sir T. Brinton: Can the hon. Lady explain to us why, when in this country we have always rejected the idea of referenda as a method of government, in the case of Gibraltar we can contemplate going over the heads of the clearly expressed opinion of both the Government and the Opposition of that territory apparently to prove to the Spanish dictatorship that the Gibraltarians do not wish to be Spanish?

Mrs. Hart: As the hon. Gentleman will know, throughout the whole debate with Spain and in all these difficulties, which arise essentially from the old Treaty of Utrecht, which creates the special condition in this matter, we have tried to adhere to what is legal and right in terms of international law. We are now in a situation where the last binding legal obligation upon us is a United Nations Resolution, for which we voted. But the terms of that Resolution enable us to take full account of and to give great stress to the interests of the people of Gibraltar. One can establish what those interests are by a reference to the leaders of the parties in Gibraltar. That is one possibility. But what is clear is that it is infinitely more meaningful if the people themselves are able to express their views on where their interests lie by means of a Referendum. It is not quite the first occasion. It is the first occasion in a British dependent territory, but there were two occasions in the past, in Togoland and the British Cameroons, which were United Nations trust territories under British administration, when similar referenda were held.

Mr. Arthur Lewis: In view of the Tact that my hon. Friend's statement has

been welcomed by the overwhelming majority of hon. Members on both sides, with suitable amendments, could she organise a similar sort of referendum in Rhodesia?

Mrs. Hart: rose—

Mr. Speaker: Order. These questions are about Gibraltar.

Sir W. Bromley-Davenport: The hon. Lady referred earlier to Resolutions being passed by the United Nations. But what earthly good do Resolutions passed by that body do? What good did a Resolution do to the people of Hungary when they were being massacred—

Mr. Speaker: Order. Even the hon. and gallant Gentleman must put his question about Gibraltar.

Mr. Hector Hughes: Will my hon. Friend specify what assistance Britain will give to Her Majesty's subjects in Gibraltar against outside Spanish influence to ensure that the Referendum will be a real expression of opinion by the people of Gibraltar?

Mrs. Hart: On the basis of my knowledge of the people of Gibraltar, I have no fears that they will not express their views in the proposed Referendum freely and without concern for any influences which may come over the border from Spain.

Sir J. Langford-Holt: The hon. Lady has mentioned two alternatives—closer association with Spain, and closer association with the United Kingdom. The third alternative, which would appear to be obvious, is that of complete independence. Is this to be included in the Referendum? If not, what are the reasons for excluding it?

Mrs. Hart: This is very much linked with the Treaty of Utrecht. If the hon. Gentleman studies its terms, he will see why that is so. It is for that reason that the alternatives will be to pass to Spanish sovereignty or to retain links with Britain.

Several Hon. Members: rose—

Mr. Speaker: Order. We must move on.

OFFICIAL REPORT (CORRECTION)

Mr. Iain Macleod: On a point of order, Mr. Speaker. Towards the end of my speech last night, when rehearsing possible future legislation, I am reported in column 429 as saying:
It may be that in the end some acceptable form of compulsion will be found.
In fact, of course, my case and that from this side of the House, as the Government have always acknowledged, was against compulsion in any form, and the actual words which I used were:
… some even less acceptable form of compulsion will be found.
In common with all hon. Members, however, I would like to say how much we admire the Official Reporters, particularly perhaps in the hubbub of winding up speeches when they are working against a deadline, but in a matter of such fundamental disagreement between the two sides of the House, I thought it right to make the statement now rather than wait for the corrected version to appear in the Bound Volume.

Mr. Mendelson: Further to that point of order, Mr. Speaker. Might it be added to the record that the shorthand reporters could have been led to this interpretation by the speech at the beginning of the debate by the right hon. Member for Mitcham (Mr. R. Carr), who put forward a close, tight legal framework of compulsion?

Mr. Speaker: That is a political addendum rather than a point of order. I will see that the correction is made.
In asking for the correction, I am glad that the right hon. Member for Enfield, West (Mr. Iain Macleod) called attention, as I have done before, to what, I think, is the unanimous feeling of the House, to the way in which we are accurately and well served by the reporters in the Press Gallery. We do not always make it easy for them.

FINANCE [MONEY] (No. 2)

Queen's Recommendation having been signified—

Motion made, and Question proposed,
That, for the purposes of any Act of the present Session relating to finance, it is expedient to authorise—

(a) the payment out of moneys provided by Parliament of any increase in the sums so payable under the Selective Employment Payments Act, 1966 which is attributable to any provision of that Act of the present Session increasing the amount of any payment to an employer in respect of any person and any contribution week under section I or section 3(2)(a) of the said Act of 1966 by a sum not exceeding thirty shillings or such higher amount as the Treasury may by order from time to time determine where the payment is in connection with employment in an area which is for the time being or has formerly been specified as a development area under section 15(2) of the Industrial Development Act, 1966 or in any such locality outside an area which is or has been so specified as is specified in section 15(6) of that Act;
(b) the making out of the Consolidated Fund of payments to the Exchequer of Northern Ireland towards expenditure incurred under any enactment for corresponding purposes passed by the Parliament of Northern Ireland.—[Mr. MacDermot.]

3.57 p.m.

Mr. Terence L. Higgins: It would be unfortunate if this Money Resolution were approved by the House without some protest being made on behalf of the Opposition and, I should have thought, on behalf of back-bench hon. Members on the Government side.
Its purpose is to widen the scope of the Financial Resolutions at present governing the Finance Bill, and, together with the procedural Motion which follows, it will enable the Government's new Clause No. 67 introducing the regional employment premiums to be included in the Finance Bill. So far, Amendments to the Finance Bill have been severely inhibited by the terms of previous Money Resolutions, and it has been very difficult for hon. Members on both sides to get into order Amendments altering the Selective Employment Tax or the Selective Employment Premium Act, 1966. This has clearly made it difficult to debate them in a sensible manner.
It would have been more courteous if the Government, when considering what


the original Money Resolution should have been, had taken account of the fact that there is widespread protest about the operation of the Selective Employment Tax and very grave doubts about the way in which the Selective Employment Premiums are being paid. For that reason, it is right and proper that we should express our dissatisfaction with the way in which the Government have handled the matter on this occasion.
I would not urge my right hon. and hon. Friends to vote against the Resolution but, rather, that we should wait until we come to the actual debate on new Clause No. 67. It is right, however, that we should express our dissatisfaction.

The Financial Secretary to the Treasury (Mr. Niall MacDermot): The hon. Member for Worthing (Mr. Higgins) has made a general charge which he has not supported in any specific way. This is a Money Resolution for something which does not normally appear in a Finance Bill, namely, a proposal for expenditure.
Naturally, the responsibilities of the Financial Secretary in drafting a Money Resolution on such matters traditionally go beyond those where one is dealing with an ordinary Money Resolution in a Finance Bill, because one has to consider the responsibilities of the public purse.
I do not know in what respect the hon. Gentleman thinks that this Money Resolution is unduly restrictive. The hon. Gentleman complained that the earlier Money Resolution was too restrictive and restricted the debate under Clause 24. I would have been prepared to defend it at the proper time had the House voted on it, but there was no challenge, and I do not think that it would be proper to take up the time of the House in debating it now.

4.0 p.m.

Dame Irene Ward: It is difficult to follow the purpose of this Money Resolution. If the House passes it—and I gather that as we are not going to oppose it it will be passed—will it be in order to table Amendments dealing with the Government proposals for the development areas? For instance, under the present arrangements it is not

possible to table Amendments to deal with an anomaly which allows the Selective Employment Tax premium to be paid to workshops for the blind run by voluntary societies but not to those run by local authorities. Newcastle-on-Tyne is in a development area and wishes to have representations made on this point. As this issue will affect associations which help the blind in many development areas, will it be in order, so that I can carry out the wishes of the City and County Borough of Newcastle-on-Tyne, to table an Amendment to discuss this matter?

Mr. MacDermot: It is not for me to say what will be in order, but I think that under this Money Resolution the hon. Lady will have difficulty in tabling an Amendment of any character dealing with the effect of the ordinary Selective Employment Tax and the refunds or premiums under it. What we are concerned with here is a proposal in the new Clause for regional employment premiums, and, as the Title indicates, they are of a regional nature. Accordingly, it would be neither relevant, nor within the terms of the Money Resolution, to table Amendments which were limited to the operation of particular industries, or indeed, as the hon. Lady is suggesting, to parts of industries within these regions.

Dame Irene Ward: rose—

Mr. Speaker: Order. The hon. Lady has exhausted her right to speak, but she can ask a question before the Financial Secretary sits down.

Dame Irene Ward: Thank you, Mr. Speaker. I wanted to ask whether under the new proposals we would in fact be extending the injustice between the two types of association for the blind.

Mr. Speaker: Order. We are getting into merit. We cannot have that.

Mr. John Hall: Would it not be right to assume that the Government knew some days ago that they would have to table this Money Resolution to enable them to give effect to the new Clause dealing with regional employment premiums? Would it also be right to assume that had this Money Resolution been tabled before we discussed the Clauses dealing with S.E.T. many of the Amendments which were not in order would have been, and that the Committee


would have been able to discuss many things which it was prevented from discussing by the narrow terms of the previous Money Resolution? Is it a pure coincidence that this Money Resolution has been tabled after the Committee has concluded its discussions on the S.E.T., or is there some other reason for it?

Mr. Raymond Gower: The Financial Secretary is usually very fair in his arguments, but I think that he made a false point when he said that we had lost our right to argue against this Money Resolution because we did not vote against the original one. Had we had any idea that at a later stage there would be such a wide extension as this we would have voted against it, and I do not think that the point made by the hon. and learned Gentleman can be sustained.

Sir Douglas Glover: I would like the advice of the Chair on this Money Resolution. We have discussed various matters in Committee. Various things were ruled out of order because of the narrow way in which the original Money Resolution was drawn. This Money Resolution will widen the scope of debate. Does this mean that on Report Amendments which would otherwise have been out of order will be accepted by the Chair? If it does, it will alter the Opposition's attitude to much of the further debate on the Bill.

Mr. Speaker: The hon. Gentleman is drawing a very long bow if he expects Mr. Speaker, at this stage, and at this point of the debate, to advise on what will be in order on Report. I shall deal with that when we come to it.

Mr. MacDermot: I rise purely out of courtesy to the hon. Gentlemen who have asked further questions. I think, Mr. Speaker, that the answer which you have given is really my answer to the points made by them. It is for them to see whether on Report there is anything in this Money Resolution which widens the debate on Clause 24 when it comes

to be reconsidered. It is my view that it does not.

Question put and agreed to.

Resolved,
That, for the purposes of any Act of the present Session relating to finance, it is expedient to authorise—

(a) the payment out of moneys provided by Parliament of any increase in the sums so payable under the Selective Employment Payments Act 1966 which is attributable to any provision of that Act of the present Session increasing the amount of any payment to an employer in respect of any person and any contribution week under section 1 or section 3(2)(a) of the said Act of 1966 by a sum not exceeding thirty shillings or such higher amount as the Treasury may by order from time to time determine where the payment is in connection with employment in an area which is for the time being or has formerly been specified as a development area under section 15(2) of the Industrial Development Act 1966 or in any such locality outside an area which is or has been so specified as is specified in section 15(6) of that Act;
(b) the making out of the Consolidated Fund of payments to the Exchequer of Northern Ireland towards expenditure incurred under any enactment for corresponding purposes passed by the Parliament of Northern Ireland.

FINANCE BILL (PROCEDURE) (REGIONAL EMPLOYMENT PREMIUMS)

Resolved,
That, notwithstanding anything to the contrary in the practice of the House relating to the matters which may be included in Finance Bills, provision may be made in any Finance Bill of the present Session for increasing the amount of payments to employers under section 1 or section 3(2)(a) of the Selective Employment Payments Act 1966 and for the making of grants to the Exchequer of Northern Ireland towards expenditure incurred under any enactment for corresponding purposes passed by the Parliament of Northern Ireland.—[Mr. MacDermot.]

Instruction to the Committee on the Finance (No. 2) Bill that they have power to make provision therein pursuant to the said Resolution.—[Mr. MacDermot.]

Orders of the Day — FINANCE (No. 2) BILL

Further considered in Committee [Progress, 12th June.]

[Sir ERIC FLETCHER in the Chair]

New Clause 67.—(REGIONAL EMPLOYMENT PREMIUM.)

(1) Where, in the case of a person in an employment to which section 1 of the principal Act applies in respect of whom a payment under that section falls to be made to the employer, the establishment in or from which that employment is carried out is situated wholly within a development area, then, subject to subsections (2), (4) and (5) of this section, the amount of that payment shall, in respect of any contribution week beginning on or after 4th September, 1967, be increased—

(a) if that person was treated for the purpose of selective employment tax for that week as a man over the age of eighteen, by thirty shillings; or
(b) if that person was treated for that purpose as a woman over the age of eighteen, by fifteen shillings; or
(c) if that person was treated for that purpose as a boy under the age of eighteen, by fifteen shillings; or
(d) if that person was treated for that purpose as a girl under the age of eighteen, by nine shillings and sixpence.

(2) Where in any contribution week the person aforesaid was employed by the employer in question in an employment to which section 1 of the principal Act applies, but

(a) he worked in that employment for an aggregate of less than twenty-one hours, or he did no work in that employment; and
(b) that employment was not in pursuance of a contract or as the holder of an office which normally involved that person's working in that employment for an aggregate of twenty-one or more hours weekly,
the amount of any increase in respect of that person and that week by virtue of subsection (1) of this section, instead of being that for the time being specified in paragraph (a), (b), (c) or (d), as the case may be, of that subsection, shall be one half of the amount for the time being so specified; and paragraphs (i) and (ii) of section 24(1) of this Act shall apply for the purposes of this subsection as they apply for the purposes of the said section 24(1).

(3) In section 3(2)(a) of the principal Act (which provides for the making to certain employers who are public bodies of payments corresponding to the payments made to other employers under section 1 of that Act), the reference to the appropriate additions specified in paragraphs (a) to (d) of section 1(1) of that Act shall, in relation to persons employed in any such part of the undertaking of an employer to whom the said section 3 applies as is

specified in Part III of Schedule I to that Act who are so employed at or from places situated wholly within development areas, be construed as including a reference to the appropriate increases for the time being specified in paragraphs (a) to (d) of subsection (1) or in subsection (2) of this section.

(4) The Minister of Labour shall not be required by virtue of subsection (1) of this section to increase any payment to an employer under section 1 of the principal Act in respect of any person and any contribution week unless the employer produces such records as that Minister may reasonably require—

(a) of the number of hours worked by that person in that week; and
(b) of the number of hours of work in a week normally involved for that person in consequence of the terms of any contract or by reason of any office held by him.

(5) The Treasury may by order made by statutory instrument—

(a) substitute for all or any of the amounts specified in subsection (1)(a) to (d) of this section such other amount or amounts as may be specified in the order;
(b) in a case where increases by virtue of this section have been paid in connection with any establishment but cease to be payable by reason of a change in the development areas, provide for increases to continue to be paid by virtue of this section in connection with that establishment for such period as may be specified in the order and of such amount or amounts as may be so specified either in relation to the whole of that period or in relation to different parts of that period;
and any such order may be made either in relation to all development areas or in relation only to such development areas or parts of development areas as are specified in the order, and may vary or revoke any previous order under this subsection; but no such order shall be made unless a draft thereof has been approved by resolution of each House of Parliament.

(6) In this section—

(a) the expression 'development area' means an area for the time being specified as a development area under section 15(2) of the Industrial Development Act 1966, and includes any such locality outside that area as is specified in section 15(6) of that Act;
(b) the expression 'the principal Act' means the Selective Employment Payments Act 1966.

(7) If any enactment of the Parliament of Northern Ireland makes provision with respect to Northern Ireland which appears to the Treasury to correspond to the provision made with respect to development areas by this section, there shall from time to time be paid out of the Consolidated Fund of the United Kingdom into the Exchequer of Northern Ireland such sums towards the expenditure incurred in making payments under that enactment as the Treasury, after consultation with the Ministry of Finance for Northern Ireland, may see fit to direct.—[Mr. Callaghan.]

Brought up, and read the First time.

4.9 p.m.

The Chancellor of the Exchequer (Mr. James Callaghan): I beg to move, That the Clause be read a Second time.
Thanks to the procedure which the House has just adopted, I am able to move this Clause. It will bring such profound benefits to the development areas of this country that I am not surprised the House was unanimous in agreeing that this matter should be discussed.
There is no doubt that this proposal goes to the very heart of the problems of the development areas. It is of the utmost significance to them in the provision of new jobs, and perhaps I might give two figures to show the scale of the Government's intervention and assistance which is now being given to these areas. The total of the special assistance which has been given to these development areas so far is about £90 million per annum. The total of this new assistance is about £100 million, so the assistance will be doubled. I emphasise that I was referring to the special assistance which they receive and not to the normal kind of Government assistance which is available throughout the whole of Britain.
I think the Committee will realise from those two figures that the scale of this operation is of a character which has not been seen since the development areas themselves were established, and I think it will be found in the course of some years to have a remarkable effect in equalising economic activity and economic growth between the development areas on the one hand, and the remainder of Britain on the other.
The new Clause gives effect to the proposals in the Green Paper, which was amplified in the White Paper published last week after our debate. It will have effect from 4th September, 1967, and provides for the new premium to be paid to employers in respect of employees in manufacturing industry in the development areas. It fixes the rate for men and women, for boys and girls, and for part-time workers. The cost of the premium this year, for 1967–68, is likely to be about £35 million—in due course, the Financial Secretary will present a Supplementary Estimate for that sum—and £100 million in a full year. Provision is also made for assistance from the Consolidated Fund to Northern Ireland for the intro-

duction of corresponding arrangements there.
As drafted, the Clause does not provide for the termination of the premium, which will therefore continue until fresh substantive legislation is passed, but it gives power to vary the rates of premium up or down without limit, and, importantly, to maintain it for areas which might cease to be parts of development areas. People should have some certainty about the payment of this large premium.
Subsection (1) specifies the rates of the premium by increasing for employers in qualifying establishments in development areas the rates of the selective employment premium paid by the Minister of Labour under the Selective Employment Payments Act, 1966, or by the designated Minister.
The classes of employment in respect of which the premium is to be paid will therefore be governed by the S.E.P. Act, that is, it will be confined to manufacturing industry. These classes may be varied by Order under Section 9 of the S.E.P. Act which, in the case of an order varying the application of Section 1, is subject to affirmative Resolution of both Houses of Parliament. Because payments are to be made in this form—this will please hon. Members opposite, but no more than me—they can be made at very small extra cost through the existing administrative machinery of the Ministry of Labour, because the records and registration are already known.
Once again, the Selective Employment Tax, as it is developing in these broadening aspects, shows what a useful weapon in our fiscal armoury it is becoming.
The regional employment premium will be payable in respect of employment in the contribution week beginning 4th September. This day has been chosen as the first convenient date after the passage of the Finance Bill and is the same as for the new refunds for part-time and overseas employment. It will allow adequate time for detailed guidance to be given to employers.
R.E.P. will be paid quarterly in arrears. Quarterly claim periods begin on different dates so as to spread the work load of paying claims for the Ministry of Labour's local offices. Employers submitting claims covering the period July,


August, and September will receive the increased rates of premium for September; those claiming for the period August, September and October will receive the increased rates for September and October. Thereafter quarterly payments will include the increased rates for the whole period.
4.15 p.m.
At the rates specified, the premium is estimated to represent a subsidy of about 71 per cent. of wages in manufacturing industry in the development areas. The rate for men is 30s., which will be added to the additional element in the selective employment premium, so that the total payable to an employer will be 37s. 6d. a week for a man, 18s. 9d. for a woman or boy and 12s. for a girl. This is, of course, a substantial subsidy and its direct purpose is to be selective. It is intended to make products in the development areas more competitive with those outside.

Mr. Stanley R. McMaster: Is there any provision for varying this amount between regions, as unemployment varies between regions?

Mr. Callaghan: There is, and I shall come to that point.
Subsection (2) provides for the payment 3f half the full rate for part-time workers, which will encourage the employment of those unable to work full time without tilting the balance too far in favour of part-time work. The premium will be paid at half the rate for the worker who normally works less than 21 hours a week, if in any week he either works for less than 21 hours or does not work at all—for instance if he is on holiday—but not if he is sick, since S.E.T. would not then be payable.
Premium will be paid at the full rate for any worker, whatever his normal hours of work, who works 21 or more hours in any week and for any worker who normally works 21 or more hours a week, even if in any particular week he works for less than 21 hours, for instance, if he is on short-time.
Subsection (3) extends the payment of the premium to manufacturing employment in fringe establishments of nationalised industries, as was done before. There is a number of such fringe

activities which I need not specify. It also provides for the payment of the premium to the steel industry, after nationalisation. This will be treated as a manufacturing industry for the purposes both of the premium and of investment grants, and this will require no fresh legislative action.
Subsection (4) empowers the Minister of Labour to pay the increased premium only provided that an employer provides records of hours worked each week and those normally worked. The records need be only such as the Minister may think are reasonably required. As public money is to be paid out, that is an essential provision.
Subsection (5) provides that the rates may be varied by Treasury Order, subject to affirmative Resolution in both Houses of Parliament. It does not give power to reduce the premium to nil, which would terminate the scheme, and I have already said that the Clause does not run down. With this qualification, it gives the Government considerable flexibility in carrying out the purposes of the scheme and the necessary powers to carry out the intention in regard to tapering, to which I referred in our earlier debate.
Paragraph (a), read with the last five lines of the subsection, provides that the rates can be varied up or down without limit for men and women, boys and girls and part-timers, together or separately, and—I now come to the point of the hon. Member for Belfast, East (Mr. McMaster) —that different rates may be fixed for different development areas, whether in existence now or scheduled in future, or for parts of such areas. In other words, there is a great deal of flexibility in the operation of the scheme. The tapering can be arranged by passing successive Orders.
Paragraph (b) provides additionally for Orders to continue the premium in parts of the country which, through having been descheduled under the Industrial Development Act, 1966, would cease to be development areas. Subsection (6) defines development areas as areas specified under Section 15(2) of that Act, together with the others. Subsection (7) provides for payment out of the Consolidated Fund to the Northern Ireland Exchequer as the result of any local


legislation to introduce an R.E.P. scheme there.
I now turn to what have become known as the "grey areas", for which I have still not thought of a better name. It has been suggested—there is an Amendment to this effect, though I do not know whether it will be called—that this scheme should take account of those areas, but I explained in our debate on this matter that, whereas the problems of development areas are well known, those of the "grey areas" have not been so well analysed and we do not know whether the same treatment is appropriate.
Nevertheless, there is a problem there. These areas do not give the impression of dynamic growth of some other areas. It is more that factor than large-scale unemployment in those areas which is important. Therefore, as I said in the earlier debate, we believe that there is a need for further study, and we have carried the matter further since I wound up that debate.
My right hon. Friend the First Secretary has considered this further and has invited Sir Joseph Hunt to act as chairman of a group to study these areas to find the answers to their industrial, commercial and other problems, so as to see what measures are necessary to generate economic growth and a sense of dynamism there. Sir Joseph will be known certainly to some hon. Members as chairman of the Economic Planning Council for the West Midlands, where he did an excellent job. His work there having ended, he can now take on this task.
My right hon. Friend is at the moment considering the terms of reference and membership of this commission and I will report them to the House in due course Whether the Amendment I referred to is called or not, I hope that my hon. Friends who tabled it will feel that this will go part of the way to meet the problem by making a study of these areas under independent chairmanship—

Mr. Iain Macleod: The development areas are, of course, a familiar concept and we know their boundaries, but I do not believe that there is any definition of a "grey area". Many hon. Members may feel that their areas are "grey areas". Is there any way, therefore, either in the terms of reference

for Sir Joseph Hunt or by some other means, in which the right hon. Gentleman is thinking of defining them?

Mr. Callaghan: I am obliged to the right hon. Gentleman. This is very much a difficulty, as there is no boundary to or concept of these areas. This is one of the problems which we are considering so that Sir Joseph Hunt shall have terms of reference with some boundaries. I shall certainly bring what the right hon. Gentleman has said to the notice of the First Secretary.
This new Clause, bold and dramatic though it is—it will have an impact on the development areas over their seven year life which is bound to decrease unemployment substantially and increase employment even more substantially by creating additional opportunities—must take its place among the other measures followed by successive Governments for assisting these areas. I refer particularly to the use of I.D.C.s, the loans and grants made to these areas and to the accelerated programme of training for skill. In my view, the latter is one of the most important issues here. I have seen in my area in South Wales that when expansion comes, it tends to falter because of the absence of sufficiently trained skills in such areas. That is why the Government have paid particular attention to establishing new Government training centres, although it is just as important to encourage training within industry in these areas; and some very good work is going on.
4.30 p.m.
I emphasise that this new scheme, however bold its sweep may be—and whether or not certain hon. Members agree with it, they will agree that it is bold in conception; I hope it will be equally bold in execution—must be bolstered by the present policies which are being followed in relation to training, loans and grants to industry, I.D.C.s and the Government programme of advance factories. It is by a concerted move forward on all these fronts that I believe that in the next seven years—because that is the expected life of this premium, before it starts to taper off—we will be able to equalise opportunities for jobs between one part of the country and another to a much greater extent than we have done


so far and—because this flows from this activity—equalise opportunity for living in a way which everybody should live in a country as highly industrialised, skilled and cultured as ours.
If we can, through the efforts of the House of Commons and by Government intervention of this sort, kill this lingering concept of two nations, one of which is growing while the other is decaying, we will be doing something remarkable in our lifetime to subtract from the social tensions inside the country and we will add to the total sum of human happiness. Nobody could ask for more than that.

Mr. Terence L. Higgins: If for nothing else, we can be grateful to the Chancellor of the Exchequer for quoting in his closing remarks some words once used by Benjamin Disraeli.
When the Green Paper was first issued it was welcomed not only in the House but throughout the country as an advance in as much as it was possible for a national debate to take place about a fiscal proposal before it was brought into operation. That was certainly an advance on the situation which had prevailed previously in respect of Corporation Tax, Capital Gains Tax and Selective Employment Tax.
The extraordinary thing is that we now find ourselves in the position where, by and large, the debate has gone very much against the Green Paper. Certainly a great many arguments have been adduced against the policy contained in that document. None the less, the Government have decided to go ahead, and immediately. Despite the recent claims of the Chancellor to the effect that reflation is under way, the right hon. Gentleman and his colleagues must obviously be concerned that unemployment in the regions may be worse next winter than it was last winter. The weather may not be as favourable next winter as it was last year.
This haste is reflected in the drafting of the Money Resolution, about which we were right to complain, since the simple point is that the Government, in their earlier Money Resolutions, had sought to restrict debate. The moment that they wished to table a new Clause, they were prepared to draft a different Money Resolution to enable them to make this Amendment.
This afternoon we want to consider the economic effects of the new Clause, and I should have thought that all this would have been taken into account in the Chancellor's Budget statement—that nebulous concept which he was anxious not to express in quantitative terms. We do not know whether or not he took account of the effect of this proposal or even whether he knew at that time that he would introduce a Clause of this type. Was this an afterthought? Certainly we must now consider very carefully the economic effects of the regional employment premium and the economic justification for it; and I shall concentrate on that aspect. I have no doubt that in the ensuing debate a number of hon. Members will, as they did when we debated the Green Paper, be particularly concerned with constituency and regional points.
The economic case is fundamentally not one with which we would disagree, because it is undoubtedly true that in the post-war period the economy has been balancing on a knife edge. It has been swinging between periods when, if one reflated, costs and prices were likely to rise rapidly, leading to a deterioration in the balance of payments—before unemployment had been mopped up throughout the country—and periods when, if one took action in the other direction and adopted deflationary policies, unemployment became unacceptably high in the regions before one had cured inflation. Anything which tends to balance up regions of the economy is, therefore, likely to be advantageous.
If this latest move is successful we shall be able to operate the whole economy at a higher level than would otherwise be possible, but one must take into account, when considering such measures, what the underlying effects are likely to be in terms of efficiency and the utilisation of resources. In other words, it is not only a question of the level of operation but the pattern.
Therefore, while we do not disagree with the Government's aims—because they are very much the same as those which motivated my right hon. Friend who is now the Leader of the Opposition when he introduced measures to encourage investment in the areas of high unemployment—we consider that this proposal has a number of objectionable


features; and I do not believe that the economic arguments supporting it can reasonably be taken as proven.
The main argument put forward in the Green Paper is that the regional employment premium will not be inflationary because it will be self-financing, and that resources will be used which would otherwise remain idle. We should consider precisely what is meant by the term "self-financing". It means two things, depending on whether one looks at it in money terms or in terms of physical resources.
In money terms, the argument appears to be that the money expended by the Exchequer will be covered by higher Revenue receipts. We are told that the proposal will cost about £100 million. The Government will, therefore, need to show that Exchequer receipts are likely to increase by that amount. How might this come about? We need to look at this in some detail because it is of fundamental importance. I understand that some of the benefits will come back to the Exchequer simply because the higher profits which will result from giving a subsidy of this kind to manufacturers—if they remain profits—will be subject to Corporation Tax. The Government are, therefore, obviously giving something with one hand and taking it back with the other.
Secondly, will a higher level of activity—the sort of level which the Government hope to achieve; although its achievement is by no means certain—mean that personal and company incomes will be higher so that, in progressive tax terms, more will accrue to the Revenue? I hope that the Chief Secretary will give clear estimates of how much it is expected will come back in Corporation Tax in the first instance and how much he thinks will come back as a result of higher levels of income in the country as a whole later. It is not right for the Government to maintain that this is a self-financing project unless they can demonstrate that it is so.
From the monetary point of view, the question of timing is crucial. As we saw when S.E.T. was introduced, the Government tend to disregard questions of timing. It is surely clear that the regional employment premium will be paid out immediately, whereas the effects which we may get from a higher level

of activity—going on the assumption that it will be achieved—along with the higher revenue which that will produce—may take a number of years, if it happens at all. Thus, in the short run I should have thought that it was quite clear that these proposals will tend to be inflationary or, at any rate, significantly increase the level of aggregate demand in the economy. If so, we should be told so because it is somewhat contrary to paragraph 27 of the Green Paper, which states that the proposal is not advanced as a short-term, counter-cyclical measure.
I turn from the financial side to the question of whether it is self-financing in terms of real resources. To determine this we need to analyse what the chain of events is likely to be after the payment of the premium is made. For this exercise let us consider a firm in the development area. This firm receives the regional employment premium and it seems that there are a number of things which it could do with it. It could, first, simply use it to increase profits and, presumably, distribute them as dividends. In that case, I suggest that we will find that Corporation Tax is paid, so that the Government would claw back a bit of the premium—remembering that they are announcing its inception with such a great flurry this afternoon.
So far we have got to the point where it would go into profits. But has the right hon. Gentleman considered what would happen if there is an overspill into other areas, inflationary pressure being exerted in those areas? It will all depend on where the shareholders of the firm are located. It is not clear whether the shareholders of firms in the development areas are located in those areas or elsewhere. They may be located in areas which are normally suffering from overheating. If this alternative is the right one, then the Government's argument is rather weaker than they might lead us to suppose.
Alternatively, the firm might be operating in a development area under unfavourable conditions. It might say, "We have had this windfall. What shall we do with it? Let us pay off our overdraft". In those circumstances, bank liquidity will be increased. But it is not clear that there will be no seepage of liquidity from banks in the development


areas into other areas which are normally suffering from overheating and excessive demand.
It is probably true that where there has not been as much demand in the past for resources, there will not be as much demand for loans, even with this proposal. Thus, the normal thing will be for it to increase bank liquidity elsewhere in the economy. If that happens, then the Government's argument that it will not seep into other areas will have diminished, and with it the argument about this being self-financing will be correspondingly reduced.
Perhaps the amount of additional money will be absorbed in wage claims. We should be clear that the whole of the argument put forward in the Green Paper is based on the assumption that wage claims will not eat up a considerable amount of the regional employment premium. In this context, it is significant to note that the T.U.C. and the unions in general seem to have been much the most enthusiastic about this proposal.
The Government may say that all this will be covered by an incomes policy and that, if this sort of thing happened, they would immediately refer it to Aubrey Jones. Is it seriously considered possible for Aubrey Jones to study all the cases where this might happen? Or is it thought that the Government could introduce a prices and incomes Order on particular unions or firms whenever it happened? It is clear that this will tend to have an inflationary effect and that quite a lot of it—I believe the C.B.I. has suggested 50 per cent.—will go in the form of higher wage claims.
It is important to note, in this connection, that we in this country have a series of national wage agreements—a restrictive trade practice which, in a sense, this proposal is endeavouring to overcome. The trouble is that such differentials as we have are in terms of the wage drift between regions, the amount paid above the basic national rate. The effect of this proposal, particularly if the Government say, "We must not have too many wage claims as a result of R.E.P., is likely to increase the fringe benefits and other demands in the development areas. So such differentials as we have in labour costs would tend to be diminished, which

will, in turn, tend to lead to an uneconomic allocation of resources.
Yet another alternative is that the intention of the Government will come to pass and we shall find that firms will reduce prices and increase output. However, there are a number of restrictive agreements concerned with national price arrangements, basing points systems, and so on, which have not been adequately covered by the Monopolies Commission and which will tend to work against the Government's intention. Recently, for example, the Ford Motor Company has introduced uniform delivered prices for its cars. Are we to understand that as a result of the R.E.P. this will change and the motor car industry as a whole will tend to have bigger differentials between cars produced in one part of the country and cars produced in another? This is an argument that we need to bear in mind.
Paragraph 32 of the Green Paper says:
Any subsidy tends to increase demand and output".
That may be so. I make only the one point that the Green Paper clearly has not been written by an economist, who would have spoken of extending demand and output, which means a move down the demand curve, and not shifting it to the right.
Finally, the money may be used to increase investment—

Mr. J. Bruce-Gardyne: Would not my hon. Friend agree that the biggest factor in any manufacturer's pricing policies is the state of the market, and that this will not be affected in any way by the Government's proposal?

Mr. Higgins: It has some effects, but it is by no means clear that they are effects in favour of the Government's arguments.
As I was saying, the money may be used for greater investment. Indeed, it is crucial that it should be so used if the Government's argument is to stand any chance at all. But if the Government are to argue that the whole thing is self-financing they will need to show that the greater investment that will take place will all be provided in terms of real resources from within that development area. But it is most likely that the R.E.P. will increase the demand on


capital equipment in other parts of the country as well as in the development areas. So, even to achieve the Government's objective, there will be further spill over into areas other than those which the Government seek to assist.
The point I make, to summarise, is quite simple. Whichever alternative use of the funds is selected, it is quite clear that purchasing power outside the development areas will be increased. The development areas are not self-sufficient, and whether the R.E.P. goes into profits, bank overdrafts, personal incomes or investment, the Government argument is not very sound.
It is not true to say that this proposal is simply a regional devaluation. It is devaluation on very special assumptions: freedom of imports, no restrictions on imports into the regions and a number of other factors.
I turn now to the actual investment decision. How business firms decide whether or not to invest in a proposal is very important. Mr. Sam Britain has pointed out that they tend to think in average rather than in marginal terms. I worked for some time in the same room with Professor Tony Meritt, who is now among the foremost authorities on capital proposals. We were both concerned with whether development should take place in development districts or outside them, and what is crucial is that if one reduces a particular cost of an input, such as labour, one tends to invest more in a technique that is labour-intensive.
I suggest that the effect of the Government's proposals will be to encourage investment in labour-intensive techniques in the development areas. This will mean that the techniques there will not be such as the firm would have chosen otherwise. It is no good the Chancellor of the Exchequer shaking his head. It will clearly encourage people who invest in capital equipment in development districts to invest in more labour-intensive equipment than they otherwise would have chosen.

Mr. Callaghan: I would not object if a new electronics firm were to set up in these areas, and electronics is a very labour-intensive industry. It is modem, and technologically advanced. There is nothing wrong with that.

Mr. Higgins: But the effect of the proposals on the electronics industry, which is capital-intensive, will be absolutely minimal, and will bring to bear no significant influence on the decision whether an electronics firm goes to a development district.

Mr. Callaghan: With respect, electronics is a clear example of an industry much more labour-intensive than capital-intensive. That is why I chose it.

Mr. Higgins: I take the right hon. Gentleman's point in terms of the labour-intensive end of the industry, but that tends to cluster round the more advanced stage. This is one of the disadvantages we had under the old capital allowances system. I do not accept the right hon. Gentleman's argument. This may be so in particular industries but, by and large, my general proposition holds, which is that the effect of the proposal must be to encourage firms in development districts to invest in labour-intensive techniques rather than in capital intensive techniques. Quite seriously, this is not open to dispute.
The trouble is that in between now and the end of the 7-year period, we shall find a situation in which the cost of labour relative to capital has gone up, because this is the other side of the coin when one gets the standard of living rising. Therefore, the techniques employed will tend to be obsolete. I am convinced that the effect of the proposal will be to distort the pattern of investment in a way that is not consistent with the long-run efficiency of the economy or, indeed, of long-run growth.
4.45 p.m.
I turn now to the question of alternatives. One of the sad things about the Green Paper is that it did not seriously take the point that one needs to discuss alternatives in detail as well as putting forward the actual proposal. It is asserted very definitely in the Green Paper that the R.E.P. will be unique, in as much as it will be self-financing. I have already suggested that it will not be so self-financing as the Government would like to think.
In any case, much of the arguments put forward apply equally to the other proposals for encouraging firms in the development areas. I suggest, for example, that better roads and improved


communications are likely to have a very significant effect in encouraging investment in the developing districts. When one looks at specific capital proposals, transport costs are very important costs indeed. Such development would be equally self-financing, because it would encourage investment in the development districts but, in addition, it would be a permanent economic advantage as against the R.E.P. subsidy which is clearly going to distort the pattern of investment for short-run political advantages. This is the heart of the matter. All the arguments in favour—self-finance, balance of payments, and the rest—are applicable to a number of alternative proposals which might well be considered. Certainly, if we are to enter the European Economic Community the significance of improved transport to the development areas may be very considerable, indeed.
Here, there are two minor points that I would like the Chief Secretary to answer. The first is this. We are told now, I understand, that this proposal will continue for at least seven years in order to give it a degree of certainty. This is somewhat inconsistent with the argument we now have just heard that a study will be made to decide whether the development area boundaries should be changed. This will perpetuate the uncertainty that has done much to frustrate development areas of high unemployment in the past. Are we to understand from the Chancellor of the Exchequer, first, that the seven years' guarantee has been given? If so, it means that the development area boundaries can only be extended onwards and not contracted. Secondly, if the seven-year period is to be guaranteed can the rates of R.E.P. only be altered up, because if they can be reduced the guarantee would be little use?
It is very worrying when one looks at the proposal that this is a subsidy to the manufacturing sector at the expense of the service sector. The fact is that many of the advantages of self-financing which the Government have put forward could be equally well applied to the case for the tourist industry, because the import content of the tourist industry is very low indeed. This is a respect in which many of the development districts—Scotland, Wales and the South-West—have a natural advantage.
To give more and more subsidy to manufacturing industry, when it is clear that the pattern of development of countries such as the United States is to expand service industry, is not the kind of interference with the economy which we should wish to see.
For all these reasons, we believe that the Government's proposals have not been given sufficient consideration, that alternatives have not been fully examined, and that this premium still will not overcome many of the counter-regional effects of the Selective Employment Tax on some of their most important service activities. The basic danger is that this is yet another extension of what one of my hon. Friends described last year as "a welfare state for industry". We do not believe that the R.E.P. will have all the advantages claimed, or, indeed, that the economic case which the Government have sought to put before us today is sound.

The Chairman: I should perhaps indicate to the Committee that the Amendment to the new Clause in the names of the hon. Members for Lancaster (Mr. Henig) and Accrington (Mr. Arthur Davidson) is not being called for separate debate.

Mr. Alfred Morris (Manchester, Wythenshawe): All of my hon. Friends will agree that much more needs to be done to reduce unemployment levels in development areas, which represent about half of the total geographical area of the United Kingdom. My right hon. Friends are to be warmly congratulated on the vigorous and sustained efforts they have made to compensate these areas for the loss of employment consequent upon the contraction of the traditional industries and to establish a more even distribution of industrial development throughout the country.
The figures speak for themselves. In May this year the unemployment rate in the development areas was 3·9 per cent. compared with 1·9 per cent. in the rest of the country. In Scotland, Wales and the Northern Region there are 2·6 per cent. unemployed skilled engineering workers for every vacancy, while in the rest of the country vacancies in these trades exceed the numbers unemployed. The policies already pursued have improved the situation, but employment


in the development areas is growing much more slowly than it is in the rest of the country and there has been persistent migration to the more prosperous areas.
My right hon. Friend the Chancellor of the Exchequer referred to what are now called "the grey areas". I represent a constituency in the north-west of England which is widely regarded as a grey area. In parts of the North-West, there is some apprehension about this proposal having a backwash effect from the development areas on to the grey areas. The fear is that we might be dyeing the admittedly white hair of the development areas at the expense of those whose hair is already turning grey.
I hope that the Commission which was referred to by my right hon. Friend will reach conclusions as quickly as possible. I and many of my hon. Friends from the so-called grey areas wish the Commission all speed and all success in reporting on the problems of our areas.
I now want to make some comments and ask some questions, on the proposal to apply the regional employment premium to manufacturing industry alone in the development areas. One underlying assumption of the proposal, which I hope is correct, is that there should be a transfer of output and demand from the Midlands and the south of England to the development areas. One of the central problems of our economy is the obesity of the Midlands and the South-East and the under-nourishment of so many to the North and the West.
A fundamental element of the assumption to which I have referred is that the premium payments should go primarily to reducing costs and prices rather than into wage increases. But how do the Government propose to achieve this objective? The hon. Member for Worthing (Mr. Higgins) asked whether the National Board for Prices and Incomes will be called upon to deal with this matter. I do hope we shall have some indication of how this attempt to avoid an increase in wage rates for similar jobs to those that exist outside the development areas, if not in the total wage bill will be achieved. What sanctions will the Government use to enforce this condition? Perhaps we could also be told to what extent manufacturers have passed on to

their customers the premiums obtained from the Selective Employment Tax?
One is often approached by constituents about the total passing on of the cost of the Selective Employment Tax to the consumer. I have written to the Minister only today giving him an example of a retailer passing on to the consumer the exact cost to him of the Selective Employment Tax. Before we approve these new premiums, I trust we shall be told to what extent manufacturers have passed on to their customers the benefit of the premiums obtained from the Selective Employment Tax. In present conditions many companies might well use the new premiums to relieve financial pressure rather than to lower prices. What sanctions would apply against firms making this use of the moneys accruing to them under the regional employment premium?
There is a serious weakness in the proposals at this point, and the Green Paper made little attempt to remove our apprehensions. It repeats the old argument, which is really a myth, that the service industries are not subject to the Purchase Tax levied on the output of manufacturing industries. This myth is one which has not been given credence to only by those who write Green Papers. It is a widely held belief that Purchase Tax does not apply to retailers. I strongly reject this. First, Purchase Tax does not apply to all goods. Secondly, the tax is not paid by the manufacturers but by the retailer. The collection and passing on of the tax to the Customs and Excise are the responsibilities of the wholesaler, although ultimately it is a tax on consumption.
Little attempt is made in the Green Paper to distinguish between services such as hairdressing and the distribution of essential foodstuffs and fuel. I should have welcomed a much more discriminating study of the industries, manufacturing and services alike, in the development areas.
5.0 p.m.
The Green Book goes to great lengths to demonstrate that the distribution of consumer goods must not attract premiums. In paragraph 20 we read:
However, provided that the regional employment premium was confined to those categories of employers in Development Areas who already receive the manufacturer's


premium, there should be no major difficulty from the point of view of technical feasibility and no substantial increase in administrative costs.
It strikes me that the question of technical feasibility has, perhaps, been given even more weight than usual. I agree that any proposal must be feasible on technical grounds, but I cannot see why it is not possible to help people engaged in essential service industries, as well as in manufacturing, in the development areas.
There is in the Green Book no acknowledgment of the part that the distributive trades have to play in providing employment in the development areas. The National Plan for Scotland, in which the right hon. Member for Argyll (Mr. Noble) as well as right hon. and hon. Members on this side will be interested, envisaged the creation of 130,000 new jobs of which 60,000 were to be in service industries. It seems that there are to be no direct incentives to achieve this result but only indirect assistance through the general improvement of the economy brought about by the competitive efficiency of manufacturing industry.
I should have thought that, in places like the Highlands and Islands of Scotland, no matter what subsidy one injected, one would be unlikely to attract much more manufacturing industry than one finds there now. And this proposal would have been far better for areas like the north of Scotland if it had carried with it some hope of help for the service industries, especially for tourism and other services which are so important to the local economy.
The proposal is exceptionally weak at this point and I hope that my right hon. Friend the Chief Secretary will say that the Government have not closed their mind to the possibility of helping at least those service industries in the development areas which can play an important part in reducing the level of unemployment.
There is a tacit assumption in the proposal that the migration of labour from the development areas is a purely economic phenomenon which can be dealt with by subsidising manufacturing industry. But there are many of us who believe that social environment is an

important factor in increasing the attractiveness of these areas and the service industries have a great part to play in this field. This reminds one of another of the myths of contemporary discussion about economic policy: that we can stop people moving from one place to another merely by improving employment prospects.
I turn now to a matter of great importance which has not been discussed at length either in this Committee or when the House discussed the Green Paper, namely, the likely effect of British entry into the European Economic Community upon the pull of the Midlands and South-East England against the development areas. It is argued by many that our membership of the Common Market would much increase the attractiveness of the Midlands and the south-eastern part of England and I hope that my right hon. Friend will say something about the possible effect of our joining the Common Market on the viability of the proposed regional employment premiums.
There are some controversialists on the subject who argue that the form of help which the Government propose may not even be allowed in the E.E.C. Be that as it may, I still think that we ought to look very carefully into the question and, in paricular, whether the period of seven years can be promised with any certainty until we know the outcome of the application to join the E.E.C. If we join the Common Market, which many people now think is less likely than it was, the pull of the Midlands and the South-East may make some of the grey areas far greyer than they are now.

The Chief Secretary to the Treasury (Mr. John Diamond): My hon. Friend has asked several questions, which I have carefully noted, and I am following every word of this speech. So that I may follow his argument fully, is he now saying that, if the danger which he envisages is likely to mature, that is a fortiori a reason for supporting the Clause?

Mr. Morris: I would say that it is a strong argument for having reservations about British membership of the Common Market. I do not especially like the Latin expression "a fortiori". I should have preferred my right hon. Friend to say "a stronger argument" rather than an argument "a fortiori". It


is not that I am anti-Latin or anti-anything else—[Laughter.] After all, we are not in the Common Market yet—

Sir Douglas Glover: This is out of order anyway.

Mr. Morris: All of us are inclined, from time to time, to go out of order, but it is our good fortune, Sir Eric, that you exercise a certain compassion.
I would certainly say, that, if the pull of the South-East, the Midlands and certain parts of the East Coast became stronger as against the development areas and the grey areas, there would be a much stronger case for doing even more to help the development areas. I am not against the proposal to help industry in the development areas. My hope is that we can help even more industries in the development areas. There are some sub-regions of development areas where 85 per cent. of the people employed work in the services, but the help given under the Government's proposal will go directly to only 15 per cent. It is not that I do not like the proposal. Of course, I rejoice with all my right hon. and hon. Friends in welcoming it, but I would like it to go even further, to help people who are engaged in what I regard as vital forms of employment in the service industries.
In my view, fiscal discrimination against service industries is not acceptable. Fiscal discrimination against particular forms of industry has a long history. In the 18th century, the physiocrats held that only agriculture was productive and that all other occupations were unproductive. Indeed, some of the physiocrats even went so far as to call agriculture "good" and all other kinds of industry "bad".

The Chairman: Order. We cannot discuss the physiocrats on this Question.

Mr. Morris: I apologise, Sir Eric, but I think that you will agree that there is something slightly physiocratic about this proposal. I was saying that we should not, as the effect of this proposal may do, give help only to certain forms of industry on the basis that they alone are productive while others are unproductive, that one form of industry is good and another is bad. I have said more than once that, in my view, the distributive trades and service industries generally make a most important contribution to the improvement of our economy and to the well-

being of our society. Indeed, it is a mark of any advanced industrial society that more and more people are employed in the service industries.
My right hon. Friend has my great personal respect and support. He says that he has taken careful note of my points, and I hope that when he replies he will indicate the Government's thinking about trying to help even more people in the development areas.

Mr. Michael Alison: I want to switch for a moment from the service industries referred to by the hon. Member for Manchester, Wythenshawe (Mr. Alfred Morris) back to a slightly more discriminating look at some of the manufacturing industries which will receive the regional employment premium. It seems to me that my hon. Friend the Member for Worthing (Mr. Higgins) was right to question some of the fundamental economic presuppositions which underlie the proposal, because if there is a flaw in the economic thinking behind the proposals they will be counter-productive in the two sectors which the Government themselves have singled out as most important, namely, the balance of payments and exports generally, and the possibility of increased competitiveness.
The key proposition in the Government's case seems to be contained in paragraph 7 of the White Paper, The Development Areas, Cmnd. 3310, where they say that inflationary pressures leading to any worsening in the balance of payments will not occur for two reasons. The first is that increased competitiveness in manufacturing industry in the development areas resulting from the regional employment premium, and the second is that increases in imports will be offset by corresponding or possibly greater increases in exports. It is particularly those two features of the general proposition that I want to examine.
I feel that the Government have not given enough critical attention to the question whether exports are likely to increase to offset the imports which will occur. There is an interesting and important feature in the pattern of exports in the past 10 years or so. That is the progressive shift in the commodity pattern of exports between the mid-1950s and 1965. There has been a definite shift in the pattern of our exports, and this


has thrown up an interesting weapon of analysis for looking at export prospects in the development areas by reference to what one might describe as the slow-moving and the faster-moving sectors in exports, corresponding to the slow-growing parts of the economy and the faster-growing parts.
In an interesting article in The Times Review of Industry on this subject in April, Mr. W. Manser pointed out that if one looks at the commodity pattern of exports one sees that the slow-moving sector comprises textiles, coal, iron and steel and manufactures of metal. That is the export sector which has tended to lag in world trade. Against that, he isolates and identifies what he calls the faster-growing sector, comprising chemicals, machinery—particularly electrical machinery—and vehicles.
The degree of shift in this commodity pattern has been striking in the past 10 years. The pattern now reflects the fact that whereas in 1953 the slow-moving sector in exports accounted for a quarter of all our exports it has now fallen to 14 per cent. Whereas in 1953 the faster-moving sector of exports accounted for 43 per cent. it had shot up to 52 per cent. in 1965. There has been a progressive shift from the slower-moving to the faster-moving exports.
My first general criticism of these proposals is that if the regional employment premium is to make any rational contribution to our export performance it must push against what one might describe as the open door in exports and not against the closing door. It must promote a continuance of the growth of exports in the faster-moving sector and must tend to diminish the relative impact of the slower-moving. In other words, it must favour chemical manufacturers, engineering, especially electrical engineering, and vehicle manufacturers and must discourage the exports of textiles and other such declining sectors because world demand for them has dropped, and that is why our commodity pattern has shifted.
5.15 p.m.
Although the Chancellor talked about the R.E.P. being a discriminating weapon, this is precisely what it is not in this respect. It is incapable of making any differentiation between those aspects of

manufacturing industry which are falling behind in the export league table and those which are moving ahead. I should go so far as to say that it is counterproductive in precisely this way, that because by definition the development areas contain a higher proportion of the slower-growing sectors it will tend to focus the Government's premium encouragement on precisely those sectors in manufacturing industry which we want to discourage. The whole differentiation will be in the wrong way; it will be counterproductive in this important respect precisely because the discriminating weapon about which the Chancellor talks fails to discriminate in the crucial sector of exports between slow-growing and fast-growing, slow-moving and fast-moving.

Mr. Geoffrey Wilson: I do not think that my hon. Friend has put his case strongly enough. The slow-moving industries are more labour-intensive than others, and this measure will encourage them.

Mr. Alison: That is true. What my hon. Friend says reinforces my case.
The second feature on which the Government base their case is not only the suggestion that the measure will encourage exports, which I have questioned, but that it will make manufactured products in the development areas more competitive. This is surely open to doubt because the lack of competitiveness must by definition, having regard to the White Paper and the new Clause, be in some way due to relatively high labour costs. Otherwise why introduce a measure to subsidise them? The cost of labour as an input must in some way be relatively so high in the development areas as to make the product of which the labour input is a large part uncompetitive with the prices charged by manufacturers for products in other parts of the country.
But when one looks at the regional variations between weekly and hourly earnings one finds, taking just three important sectors which are fast-moving—vehicles, electrical and other engineering products, and chemicals—that there already exist in the development areas substantial differences between weekly earnings, tending to favour the development areas as opposed to the non-development areas. In other words, there


already exists a substantial variation between earnings in the development areas, which the subsidy is presumably introduced to widen and increase.
Perhaps I may illustrate this by quoting one or two figures, and I apologise for doing so. Let us, for example, take engineering and electrical goods, and the average weekly earnings in this sector in two non-development areas and then in two or three development areas for the month of October, 1966. For engineering and electrical goods in the Midlands, the average weekly earnings per man in October, 1966, were 442s. a week. That compares with the average figure in Wales at the same period of 393s. Already there is a difference in the level of earnings as between Wales and the Midlands of substantially more than the premium proposed.
It can hardly be alleged surely, if the Welsh products are uncompetitive with those of the Midlands, having regard to the existing colossal imbalance between the average level of earnings in these two regions, that what the premium will do is suddenly to make them more competitive. If they are not competitive with the existing degree of regional variation between wage costs, they will never be competitive. One must look elsewhere for the reasons. This is precisely the difficulty. The real problem is not lack of competitiveness, so-called, but in large part is what my hon. Friend the Member for Worthing was getting at when he referred to a change in demand conditions.
The problem is not that it costs too much in Wales as compared with the Midlands to produce, for example, electrical equipment, but that the sort of electrical equipment being produced in Wales is not in demand either in England or in foreign markets. To introduce a permium which continues to encourage the production of that kind of electrical equipment which is not in demand, or any other manufactured article which is not in demand, is pouring good money after bad.

Mr. Raymond Gower: I do not dissent from much of what my hon. Friend is saying, but there is the point which has been made by those supporting this proposal. It is that, by this increased inducement, it is hoped that the faster-growing kinds of industry will move into

the development areas. In Wales we suffer from a lack of these newer industries but in recent years have gone a long way towards meeting the position. Those who support this new kind of assistance hope that the faster-growing industries will thereby be induced to develop in such areas.

Mr. Alison: I am grateful to my hon. Friend for that observation, for it helps to crystallise the problem. The difficulty will be that, because the payment will be undiscriminating—for it is to be paid to all kinds of manufacture—it will be counter-productive because firms in the growth sectors seeking to expand in the development areas will increasingly run into the same sort of difficulties there as are encountered in the more prosperous areas—bottlenecks of skilled labour and an increasing shortage of labour. There is to be no differentiation between recruitment of labour for the slow-growing industries and the faster-growing, exported-orientated industries which are needed in the development areas.
I challenge the whole concept in the White Paper about competitiveness being due to differences in costs and prices. It is a fundamental criticism, and it is supported by an interesting observation by the Economic Development Committee for the machine tool industry. This is a Government-sponsored body. A useful D.E.A. survey comes out every so often and I congratulate the Joint Under-Secretary of State on the excellence of the production. The issue of last October reported the machine tool industry E.D.C. as saying:
The evidence of the import study—that is to say, why we import such a large volume of machine tools—emphasised the prime importance"—
and following are the key words—
of design, performance and delivery rather than price in influencing choice.
Thus, price is rejected by the E.D.C. for the machine tool industry as being the decisive factor in influencing demand. But it is precisely price as affected by the cost of labour input with which the Government are trying to deal.
Will the premium have any effect upon delivery, design and performance? By definition it will have no effect on delivery. If there is under-employment in


the development areas, then clearly delivery dates are not a problem. I question whether the premium will have any effect on the crucial factors of design and performance in the faster-growing sectors of manufacturing industry. I believe that the opposite will be the case.
One of the important influences affecting design and performance is the whole cultural and intellectual environment of a particular region or area, whether it attracts and encourages the whole panopoly of social, economic and cultural life, art schools and a flourishing social life, whether it offers opportunities for services in the widest sense, including theatres. All this tends to filter through in the end to creative and imaginative design, to changes in performance and so on. This is how one attracts the white-collar workers and those who are tempted to go elsewhere and form the brain drain.

Mr. J. J. Mendelson: Is the hon. Gentleman arguing that nothing should be done for development areas, which have an urgent problem, until we have the general cultural environment of Luton transplanted to them?

Mr. Alison: I am suggesting it. I am doing so on the line of what my hon. Friend the Member for Worthing pointed out—that much of this £100 million could be more productively employed in promoting the social and environmental infrastructure of the development areas, tending thereby to draw in some of the modern growth industries, with all that goes with them in terms of a wide variety of employment.
The Government have gone wrong on this matter. They justify it in terms of more exports offsetting imports and of increased competitiveness, but they are ignoring the key factor that, in increased competitiveness, design and performance, and possibly delivery dates are crucial, and they are failing to differentiate, where experts are concerned, in favour of those growth industries which offer the greatest export potential. There should be a great deal more appraisal of this proposal before it is introduced.

Mr. Stanley Henig: I hope that the hon. Member for Barkston Ash (Mr. Alison) will forgive me if I do not follow his argument. Last year when

the Committee discussed the Selective Employment Tax one of the troubles was that we were often discussing it in terms of a number of different arguments, not all of which were equally good. In discussing the regional employment premium, those supporting it would be better advised to stick to the one argument that it is going to help create more employment in development areas. It seems to me that probably on that argument the proposal will stand or fall, although I want to show that, in creating more employment in these areas, it is likely to cause problems which particularly worry me for some other areas.
Along with some hon. Members opposite, I, too, rather regret the way in which the Financial Resolution was drawn. Obviously, whether or not the Amendment would have been selected would have been within your discretion, Sir Eric, but I suspect that one reason why it may not have been selected was the way in which the Resolution was drawn.
Another point is that many of us who have previously argued that the Government, before making decisions, should consult people, have been gratified by the way in which this proposal first saw the light of day in the Green Paper and only today has emerged as the new Clause 67. On the other hand, some of us are a little disturbed by the way in which the House was consulted only last week. It seems a little inconceivable that the Government had not made up their minds by then.
I suspect that when my right hon. Friend the First Secretary of State introduced last week's debate he was being fairly flexible, but by the end of the debate, during which a great deal of doubt was cast on the scheme, my right hon. Friend the Chancellor of the Exchequer was far more inflexible. I cannot see why this came about, but I am sure that it did. The Government have shown appreciation of some of the worries that were put forward in the debate and we welcome some of the concessions they have made.
The Chancellor said today that the expenditure incurred by the premium will roughly double the amount that the Government are spending on the development areas. In so far as they do this, it means that development area policy moves to


a new plane, because any tendencies which were apparent before in their effect on the rest of the country will not just he reinforced but doubled. I suspect also that these things tend to have a multiplier effect which will increase this trend further.
5.30 p.m.
The valid point which has been made concerns the cost of the scheme. There has been a certain amount of statistical juggling in certain places which suggests that somehow the cost of the scheme is nil because of the increase in employment. I suppose one can prove this kind of argument. I have seen these arguments used in other contexts. On the other hand, one is using particular resources in one way to create other resources which might be created by using the particular resources in another way, so it seems to me that there must be a cost.
The White Paper, which lies behind the new Clause, says in paragraph 29:
Since the limiting factor in the increase in total output which can be accommodated without inflationary dangers is predominantly the pressure of demand in the more prosperous areas and since the latter is likely if anything to be reduced as a result of the scheme, it follows that no general increase in taxation is called for.
There is no increase in taxation, because the effect is directly being paid by areas which do not get the R.E.P. This is fair enough, except for the fear in the back of my mind, and the minds of some of my hon. Friends, that the cost will not as a result be equitably distributed. In other words, the cost of taxation—if it were raised by taxation—might fall equally on the rest of the country, but this will not.
The problem of the grey areas has already been mentioned a number of times. The Committee will understand that, coming from a very grey area indeed—I apologise to my right hon. Friend the Chancellor of the Exchequer, but there is no other phrase to describe them—I am very worried by certain aspects of the Clause.
The final paragraph of the White Paper made reference to the fact that some of these problems could be overcome by a more flexible use than before of industrial development certificates. That phrase "industrial development certificates"

already sends a bit of a shiver of excitement, shock or horror down one's spine, depending on whose spine it is directed towards.
The idea of directing industry to certain locations, good though it is, cannot be used to cover all the anomalies introduced by successive pieces of legislation designed primarily to help the development areas.
In the City of Lancaster we have already been affected by the Government's policy on development areas, and we are likely to be even more affected by the regional employment premium. In Lancaster two big firms employ 75 per cent. of all the people in manufacturing. This was so until eight months ago when one of the firms, Nairn Williamson, decided to lay off 1,500 men or about 60 per cent. of the people which it employed. This is a hefty number. It means that about 20 per cent. of those in manufacturing in Lancaster will be laid off with one stroke of the pen, because the firm had to choose between expansion in Lancaster and expansion in a development area with necessary contraction in the other. It chose to move to a development area and that created some little problem in Lancaster. At the moment there are 665 unemployed, or 2·1 per cent. One thousand five hundred people to be laid off would mean, other things being equal, an unemployment rate of 7 per cent. How are other things not to be made equal? In other words, how much new industry is needed in the area so that one's fears are assuaged?
Until the Government introduced this proposal this might have been possible. Let us suppose that in the next six to nine months there is a reflation of economic activity and firms seek to expand and, lo and behold, one or two firms get as far as going to the grey areas and apply to the Board of Trade for industrial development certificates and are granted them. This would have been all right. However, the situation is changed because the regional employment premium almost doubles the inducement given to firms not to go to a grey area, but to go to a development area. It may be that the Board of Trade will be so flexible in its use of i.d.c.s that on occasions in the next 12 months it will say to firms wanting to go to a development area, "We will not give you an


i.d.c. to go there." It may be that it will be as flexible as that, but I doubt it.
The problem which we once had in Lancaster with a big firm is likely to happen again. In a small town most firms are not controlled locally. There is only one big employer of labour which could be called a Lancaster firm, and its shareholders come from far beyond Lancaster. The other firms have been taken over from outside. For example, Courtaulds have two firms in Lancaster. If Courtaulds want to expand and develop a new process, do they put it in Lancaster or in some other area where they already have a factory, an area which may perhaps be in a development region and would entitle them to the higher grants of the new regional employment premiums? It seems to me that almost inevitably they will go to the second area.
Drab and grey as the grey areas are already, they are likely to become even drabber and greyer if the proposal goes through in its present form without anything else being done to help these areas. There will be a massive, overwhelming, inducement to people to go to development areas and the cost will be borne by the rest of the country. However, it will not be borne equally by Lancashire and Birmingham, because Birmingham has a good many natural advantages which much of Lancashire—particularly the northern corner which I represent—does not have.
I and many of my hon. Friends welcome the announcement by the Chancellor of the Exchequer about this inquiry by Sir Joseph Hunt, but we have a number of questions to put and I hope the Chief Secretary will be aware of our concern and will try to answer our questions. First, when is Sir Joseph Hunt to report? How long will we have to wait? This is a highly urgent problem.
I know that it is going back to our basic text—the White Paper—but paragraph 49 says:
While this study is proceeding, some experience of the effects on different parts of the country of adding the Regional Employment Premium to existing policies and measures designed to assist the Development Areas will be gained and can be taken into account.
For how long does that mean we have to wait? The regional employment premium is coming into effect in September.

Within a few months I fear that some of the effects of the kind I have been outlining will be apparent. Does this mean that we shall have to wait a year before this Committee reports, and how much longer would we have to wait before action is taken? What questions will be put to the Committee at the beginning? Where will its terms of reference be drawn? One would like to know a bit more about this.
I want to come on to a couple of general arguments which concern me about the R.E.P. They have already been touched on but I think they should be mentioned again. The first concerns the argument about labour-intensiveness. It has been said that this may lead people to hoard labour. I doubt if people will employ labour that they do not need just for the sake of collecting this 30s. from the Government. On the other hand, it means that an employer who otherwise might not employ the extra labourer is given his 30s. inducement so to do. We were told last year throughout the debates on the Finance Bill that hoarding labour was a bad thing. Is is a good thing or a bad thing in the development areas, given that it is generally bad, and cannot we think of a way to help them without encouraging this bad practice? Could one have an answer on that?
It seems to me, at a conservative estimate, that about 90 per cent. of this expenditure—which has been said to be about £100 million in a full year—will be for the benefit of those who have a job in the development areas and only 10 per cent. will go directly to people newly employed. Are the Government convinced that they could not have found a more efficient method of getting new employment in those areas? It was estimated in that well-known "thunderer", The Times, that it would cost £11,000 for each job created in the development areas. Do the Government have an estimate of their own to set against that, or do they accept the estimate of The Times as reasonable?
What concerns me most about the problems of the sevice industries is the tourist industry, which is a most important industry in Scotland and in parts of the Lake District, which is in the Northern Region. Last year, as a result of the Selective Employment Tax, tourism was taxed—hotels were taxed. I did not share the


huge and sometimes synthetic concern of some others at that time, but now it strikes me that one has the oddity that the tourist industry in those areas pays tax while manufacturing industries in those areas receive it back. Is this logical?
We in Lancaster, which is 20 miles from the Lake District, rather tend to throw up our arms in horror at the thought that a firm coming to Lancaster gets no extra inducement, while a manufacturing industry going 20 miles north into the middle of attractive tourist country would get it, the tourist industry apparently paying the cost. Perhaps I have put it too starkly. I do not want to be unfair to my right hon. Friends, but I should be glad of some comment from them.
As a Socialist I have always felt that the problems of those areas which are now called development areas should be given paramount treatment, that something should be done for those parts of Scotland, Merseyside, the North and Wales which traditionally have had the problem of high unemployment. I do not think that any hon. Member would gainsay that.
I am in the embarrassing position that tonight I am being asked to approve a proposal which will give those places what they richly deserve, but which will have other and undesirable effects. This is my worry. It can best be put in the words of someone in my constituency who said about the Nairn Williamson issue that while he was in favour of more employment in Scotland, he wondered whether the Government had realised that although they had just created 2,000 more jobs in Scotland, at the same time and in the same process and by the same mechanism they had ended 1,500 jobs in Lancaster. He asked what was the point of that. I said that he had not got it quite right, but now that I think about it, what is the point? I should like some comment about this.
Considering the situation in the grey areas, such as Lancaster, there is a danger that because of the regional employment premium, other things will remain equal and that in Lancaster, for instance, we will not get the new jobs to fill up the Nairn Williamson gap. People cannot go to work in Morecambe because unemployment there is even higher, and so

unemployment in Lancaster will creep up.
Because I believe that my right hon. Friends care about this situation, I believe that if unemployment looks like creeping up in Lancaster to an unacceptable level, and in this context I mean by that the level pertaining in the bulk of the areas which have been designated development areas, they will take action, but I should like my right hon. Friend to be able to say this evening that the Government recognise the problem and that although they are trying at this stage to help development areas, should the fears expressed in the debate materialise, they will act. In particular, I hope that he will say that if unemployment in these areas creeps up as a result, so that from being grey areas they approach nearer to be being black areas, while the previous black areas become grey, everybody may rest assured that the Government will act. Some kind of pledge like that is what I would like to hear from the Government this evening.
I appreciate the difficulty of saying these things, but, with his well-known ingenuity and the help of his advisers, my right hon. Friend the Chief Secretary should be able to produce a form of words which will reassure not only myself—because in a way I am already reassured in that I have confidence in him—but, most important, reassure those many people in Lancashire who appreciate the Government's policy of helping development areas, but who are themselves worried and anxious about the future. They are right to be worried and they have a right to be reassured. I very much hope that my right hon. Friend will reassure them.

5.45 p.m.

Mr. David Steel: We all greatly appreciate the sincerity of the hon. Member for Lancaster (Mr. Henig) and his engaging frankness. I thought at one time that he was talking about a tax on Toryism, but then I discovered that he was referring to a tax on tourism. I would have preferred the former. I make no apology for following his example and referring to my own constituency, because my part of Scotland, the Borders, has become part of a new development area and any


discussion of the regional employment premium is of great importance to it.
In 1964, I was the chairman of a committee which published a study of the problems of the region, a region which had suffered constant and steady depopulation. We concluded that the fault with the existing Government incentive schemes was not only that there were no incentives in areas of depopulation but that the country as a whole did not have any form of planned economy, so that the incentives in areas of high unemployment such as central Scotland merely accelerated the rate of depopulation from parts of the country to those areas where incentives were available.
I do not like to name individual firms in my constituency, because they were not to blame for the situation, but over a period of years not only did we attract very little new industry to the Scottish Borders, but when existing firms came to expand, they chose to do so outside the area and, naturally, into those areas where there were incentives, the areas of high unemployment, and on several occasions we missed opportunities for industrial expansion on the Borders for that reason.
The Chancellor of the Exchequer has rightly insisted that we should consider the proposal for regional employment premiums in the context of the Government's regional policy as a whole. Undoubtedly, the most important development in my part of the country has been the decision to widen the criteria of the old development districts, which are now development areas, to include depopulation as well as unemployment, for without that widening we could not be discussing the merits of the premium. That was the first step and the second was to switch to the process of investment grants and to raise the level to 45 per cent. This morning we were able to welcome the statement that the time lag in the payment of these grants is going down. I hope that it will go down very much more. However, there is no doubt that the system is to encourage a process of industrial development in the development areas.
We now come to the third major proposal for industrial development in these areas, namely, the regional employment

premium. Of course it can be criticised as a method, and in previous debates some of my colleagues and I have criticised it as a method. I share the concern of the hon. Member for Lancaster about the principle that, at a time when we are told that there is a national shortage of labour, we should do anything, however slight, which might appear to encourage the hoarding of labour. Other methods might have ben found, but this is the method which the Government have chosen and tonight we have to decide whether we approve of the new proposal.
My party welcomes the proposal, because we regard as sound the principle of encouraging industrial investment in areas which require it. Even though it may have some side effects open to criticism, no doubt this method will be effective. But it will encourage industry to expand in the development areas only if labour is available. There is no point in giving employers 30s. or 15s. per head to expand in development areas if when they get there they find that labour is not available.
In my view, it is essential that wage levels should be improved in the development areas in order that the young people and the skilled labour are encouraged to remain. One of the anxieties which people in my part of Scotland have has to do with the growing tendency of amalgamations and the need for more capital in modern industry, which has led to a process of take-over of the traditional tweed and knitwear firms. They are no longer owned by people in the community but by outside financial interests.
Whereas in days gone by those controlling the firms had an interest not just in the prosperity of their firms but in the community as a whole, and were very often prepared to place the community interest above their own, the firm controlled by outside finance must have profitability as its main objective. This regional employment scheme will allay some of those fears, because if firms in a development area are owned by larger combines, then it is in precisely those areas that the larger combines are more likely to want to expand, not contract.
They will, I hope, take advantage of the regional employment premium, and we will encourage further expansion in those areas which it had been feared


might have lost a good deal of their industry through centralisation and outside control.

Mr. Michael Noble: I know the hon. Gentleman's area particularly well and I know of its problems. For the last five or six years the problem has been that there has been no one there to employ. It seems tactless to welcome something which gives a premium for something which does not exist.

Mr. Steel: I was coming to that point. I mentioned employment a moment ago and said that it was important that we had the people there, otherwise there is no point in giving a premium. I agree with the right hon. Gentleman in that. That is why I say that, contrary to some of the fears expressed about the effect of the regional employment premium, if the result is that wage levels are increased through the premium given to employers, then this is something which I welcome, even if the Government do not.
Some hon. Members were saying that one of the great advantages of the development areas was that wages were low. It is not an advantage. It may be an advantage from an academic economic point of view, but it is not an advantage to those who live there. The young people ask themselves what is the point of sticking around when the wage levels and the general level of prosperity are limited. They go off to the Midlands, the South-East or even central Scotland, where higher wages can be earned. If the effect of regional employment premium to the employers is to create a climate in which new industry comes and forces up wage levels in the existing industries, and where the employees feel entitled to press for higher wages as a result of the premium, then it is something which I welcome.
In the first debate on the Green Paper I said that I hoped that part of the advantage of this premium would be passed on to the employee. This may make the Government shudder. I am glad to see some approval from Scottish Members opposite, because this is what ought to happen. It will not be enough by itself, and the right hon. Gentleman the Member for Argyll (Mr. Noble) is right to emphasise this. We must have a con-

tinued spread of industrial training centres. I am glad to see that one Under-Secretary of State for Scotland is present. The industrial training centres in Scotland at the moment are not evenly enough spaced throughout the country, and I hope that this will be attended to in the near future.
There is one development in the new proposal which I very much welcome; it is the power to vary the premium within development areas by Ministerial Order. I hope that this power will be used, and I will give three illustrations of when I think it may have to be used. One is the effect of such a premium on the tourist industry. It is no use talking about altering a premium in relation to the tourist industry when what is required is to relieve the industry from the effect of S.E.T. If that were done it would be a positive step forward. This does not so much affect my constituency, but particularly in coastal areas, which are heavily dependent on tourism for their livelihood and economy, if they attract manufacturing industries to the area, offering the premium, the position may be reached when the tourist industry would be even more severely hurt than it has already been by the Government regardine it as an industry which should not receive tax incentives. It may therefore be necessary, within the development areas, for the regional employment premium to be varied if it is proved to be affecting the basic tourist industry in certain parts.

Mr. Bruce-Gardyne: The hon. Gentleman has referred to the ridiculous S.E.T. Does he not appreciate that this proposal is tied ineluctably to this political tax? Why is his party supporting this proposal, which is not only tied to this ridiculous tax, but which will presumably have the effect of perpetuating it?

Mr. Steel: I agree that it is tied, administratively, to the S.E.T., but I do not think that the hon. Member would deny that it is quite possible for the Government to accept my suggestion, if they were so minded, of relieving the tourist industry of S.E.T. and at the same time accept this proposal. There is nothing inconsistent about that.
The second reason why I welcome the reference to varying by Order is that I


believe it to be necessary to vary incentives within Scotland. We have the situation where virtually the whole of Scotland is a development area. I have always argued that, from time to time, it may be necessary to use more discrimination between parts of Scotland which are fairly prosperous and demand large employing industries, and those parts on the outer fringes of Scotland, which require particular incentives to attract industry. I hope that this power in the new Clause will be used in order to vary the premium in different parts of Scotland.
Thirdly, I hope that the power will be used—and I will be interested to know if the Chief Secretary agrees that this is a possibility—to change the level of premium as between male and female employees. This is something which is of particular concern to me. Knitwear, for example, uses a great deal of female labour. The main problem in the Scottish Borders is that we do not have enough male employing industries. If we get male employing industries into the region, then the existing firms are automatically helped because they will have a larger supply of female labour. The wives, and presumably in due course the daughters of the men, will be available for training and work in the mills. The firms will have a direct advantage from the introduction of any male-employing industry.
Purely from a constituency point of view there is a case for giving not 30s. per man and 15s. per woman, but 40s. per man and 5s. a woman in order to get the basic male employing industry attracted to the area. Have the Government considered that as a possibility? Is this the sort of thing that the Government have in mind in seeking to vary the premium by Order in Council?
This proposal will be of general benefit to Scotland. It is possible to criticise it in detail and method, but the feeling of the people of Scotland to this proposal was well summed up by an editorial in The Scotsman the other day, which said that for all its drawbacks, and I think that they are admitted, it was better to pump capital into the less prosperous areas than to have nothing at all. For too long we have had nothing at all. This, at least, is something.

6.0 p.m.

Mr. Elystan Morgan: It comes as no surprise to many of us on this side of the House that the party opposite should adopt such a wholly negative attitude to this proposal. [An HON. MEMBER: "Which party?"] The Conservative Party. Its attitude towards the development areas has been one of cynicism and sterility. It is proper for us to remember that in May, 1966, the Conservative Party voted against the Second Reading of The Industrial Development Bill, a Measure which created the development areas. In other words, if the party opposite had had its way, there would have been no development areas at all.
I congratulate the Government on their expedition in dealing with the proposals published in the Green Paper only two months ago. Many of us feared that there would be a rather longer period of gestation. Most of us are aware that the new Clause gives the clearest evidence of the high priority which the Government attach to the need to redress the imbalance between the fortunes of the poorer and the more affluent regions of the United Kingdom. The R.E.P. is only the latest stage in a process of consistent effort towards this end. It will, I believe, be more effective in inspiring growth in debilitated regions than the traditional medicaments which have been administered. The level of premium which has been decided will, I think, achieve the purpose of being attractive to industrialists as an allurement to draw them into development areas. At the same time it is obvious that it is of sufficiently modest proportions to avoid being a temptation to any employer to indulge in labour hoarding.
The premium proposed will obviously not be a dominant consideration. It will, nevertheless, be a significant subsidiary consideration. After all, it is an amalgam of such marginal considerations as affects hundreds, and perhaps thousands, of decisions of individual manufacturers which can contribute materially to the recovery of a development area.
The protagonists of this measure have been quick to enter caveats and stress the limitations of the scheme. It is not expected that all the ills of all the development areas can be cured by this measure; no single action could ever be responsible


for such a sweeping result. But I am sure that all Members would agree that it is vitally urgent that the Treasury, the Board of Trade, the Department of Economic Affairs, the Welsh Office and the Scottish Office should at all times be devising new and original methods of resuscitating the economies of the various countries and regions constituting the development areas.
The problem is massive, and it is only right that we should at all times keep an exact record of its proportions. I therefore plead for a periodic review of the economic position of each development area and a comparison between its fortunes and the fortunes of other regions outside. Such a review should include, in addition to the well publicised facts of unemployment levels, data concerning economic growth, investment, migration into or out of an area, productivity rates and depopulation. If such a review is conducted, I am sure that many of my hon. Friends will realise the fundamental differences of economic fortune which exist between the development areas and the grey areas on account of which they have pleaded so tearfully.
It is obvious that the proposed premium will be generally beneficial to Wales. Some are convinced that the R.E.P. is the progeny of the S.E.T., but it is only proper to remind hon. Members that the percentage of people in Wales paying S.E.T. and the percentage of those receiving a refund are substantially different from the figures in the rest of the United Kingdom. In Wales, employers pay the tax on 32·3 per cent. of insured workers and receive a refund on 37·2 per cent. In the United Kingdom as a whole they pay the tax on 38·1 per cent. of insured workers and receive a refund on only 27·3 per cent.
I make that point because, certain people in Wales are given to assume that the S.E.T. was only another manifestation of a deliberate and malevolent Treasury conspiracy against my land and nation. Since the proportion of industry in Wales to total productivity is rather higher than it is in England, it follows that proportionately there will be a greater benefit from the R.E.P. to the Welsh economy.
Although I believe the principle of the premium to be unobjectionable, there

are two inadequacies which I should like briefly to mention. Both betray a certain lack of flexibility in the proposed administration of the premium. It must be remembered, as has been mentioned by many hon. Members, that the rural areas have already been laid to a substantial contribution on account of the S.E.T. I stress, as I have stressed on previous occasions, that in many areas the imbalance between the number of people who pay the tax and the small proportion who receive a refund is monstrous. The figures for my constituency are that between 7 and 8 per cent. of insured workers receive a refund and between 81 and 82 per cent. of insured workers have the S.E.T. paid in respect of them.
We cannot look to the R.E.P. to redress this imbalance. Like the S.E.T., it is attached to manufacturing industry. It cannot, therefore, carry out the task of redressing the imbalance in the rural areas. These are already areas in which there are acute problems of growth, and it is these areas which look to the Government for assistance. Many of their indigenous difficulties have been mentioned by the hon. Member for Roxburgh and Peebles (Mr. David Steel). The basic difficulties of a lack of a reservoir of labour, an ageing population, a high rate of outward migration and a lack of a tradition of industrial development constitute a comprehensive problem which no Government have managed to tackle specifically.
In fairness to the proposal, paragraphs 50 and 51 of the Green Paper state quite fairly that it is probably impossible for the premium to be able to achieve such a task and that the rural areas must look to other and divergent measures. What does not inspire me is the reference in paragraph 51 to the Highlands and Islands Development Board. I do not denigrate the tremendous significance of setting up that Board, or what it has achieved. Nor do I have anything but welcome for the Rural Development Board which it is proposed to set up in Wales. But if the Government delude themselves into believing that the rural areas can be simply left to such plans as those, I am certain that there will be no resuscitation for the economies of those areas.
In the main, the rural development boards deal with tracts of upland territory. In any of the schemes which have been published, there is very little reference to the revival of a lowland economy. The stress of such plans is all on the injection of capital into such areas, and there is no corresponding provision for any income subsidy. Therefore, unless the Government can show very soon that they have some bold and radical plans specifically tailored for the need of rural areas, the references to the Highlands and Islands Development Board and such measures will not convince the people that they are able to achieve the task with which the Government are confronted in these areas.
Just as some of my hon. Friends and hon. Gentlemen opposite have done, I would argue that, in the short term, it would be a perfectly fair and practicable suggestion for the Government to consider excluding service industries in these areas from the Selective Employment Tax. I would go further, because there is very little rational and economic case for the payment of regional employment premium to service industries in those areas when it is remembered that a high proportion of them are engaged with tourism.
Here is an industry which contributes splendidly to Britain's exports. After all, it is earning foreign currency and "exporting" a service to persons abroad. It is calculated that tourism earns for Wales something in excess of £60 million er annum. It does not behove me in this debate to compare the subsidy and the encouragement given to the tourist industry in Wales with the contributions made by the Governments of many other small countries, but the Republic of Ireland, for example, contributes something of the order of £2 million, the Isle of Man and the Channel Islands each contribute annually something in excess of £100,000 to their respective tourist industries, whereas Wales receives a mere £12,000 or thereabouts. However, that is another argument, although it is proper for us to consider that, as an investment, the regional employment premium could well be paid to that part of the service industries engaged in tourism in such rural areas.
In the longer term, a careful study should be made of the exact fortunes of

firms which in the past have ventured into the rural areas—to trace the history of what has happened to them over a period of, say, ten years. That is the only way in which it will be possible for data to be collected and to know the real character of the problems which confront such developers.
Very much more thought should be devoted to ascertaining the exact type of industry which is most suitable for those areas. Very often, the tendency in an area almost completely devoid of industry, such as my own constituency of Cardiganshire, is to attempt to seduce any type of industry which can possibly be brought in, with the result that, over the years, there may be a high percentage of failures. This contributes to the general economic malaise of such an area more than anything else.
My other criticism is that, as it stands, the regional employment premium does not contribute in any way to redressing the imbalance which exists within a region. I appreciate that subsection (5) of the new Clause deals with such a proposition. It gives the Treasury the right by Order in Council to vary the rate of premium. If and when that is done, I will graciously and with great pleasure withdraw my criticism, but we still await such flexibility on the part of the Treasury.
If we are to rely upon a blanket form of sustenance such as that offered by the regional employment premium, so long as we rely upon it in that form, it can do a great deal of harm to the areas whose economic difficulties are most acute. There is always the tendency for growth to run to the areas of greatest attraction, making the imbalance worse rather than better. I am sure that, in addition to a regional employment premium, we must at all times be vigilant and original in our thoughts and conceive many other types of assistance which perhaps are more appropriate to the needs of those areas than the premium. We should bear in mind the case for substantial tax concessions for people who set up manufacturing enterprises in such areas.
6.15 p.m.
Although the record of the Government in advance factories in the development areas is splendid, in that they


have built twice as many in the years 1964 to 1966 as were built by the previous Government between 1959 and 1964, there is a strong case for Government-run factories concentrating upon a suitable range of manufacturing enterprises. Bold experiments can be indulged in in the way of industrial trading estates in non-traditionally industrial areas. In addition, a comprehensive study should be made of the possibility of drawing up a plan for the movement of Government offices to peripheral areas. We have seen encouraging developments in that connection in past months, but the situation calls for very much more than haphazard charity from time to time.
Perhaps more than anything, there should be drawn up a new, radical and comprehensive road programme for areas such as Wales. The tendency seems to be for the building of roads to be tied inexorably to the traffic densities now experienced in those localities. That is no more than an endorsement of the status quo—

The Deputy Chairman (Mr. Sydney Irving): I must keep the hon. Gentleman to the new Clause, and he is getting away from it a little. Will he come back to it?

Mr. Morgan: Mr. Irving, I was pointing out that the new Clause has certain limitations, and I was attempting to substantiate the case for the filling in of some of the gaps. Now that you have drawn my attention to the point, I will conclude my remarks by saying that there is a great need to redress the monstrous imbalance that exists between the development areas and the rest of the United Kingdom. In that crucial exercise, time is very much of the essence.
Reference was made earlier in the debate to the possibility of Britain entering the European Common Market. Many hon. Members on both sides have severe reservations about whether all the forms of assistance now given to the regions will be available in the event of our entry into the Common Market. Many of us have more severe reservations—

The Deputy Chairman: Order. The hon. Member can discuss only this means

of helping the regions. He cannot discuss the Common Market. He must come back to order and discuss the Clause.

Mr. Morgan: Mr. Irving, I was going to mention industrial development certificates, but to do so would test your patience and your charity much too far.
The problem facing the Government has arisen from a development which has taken place over two centuries, namely, a haphazard growth which has had neither economic balance nor social purpose. The real problem facing the development areas—and I do not believe that my hon. Friends and many hon. Gentlemen opposite from the so-called grey areas quite appreciate its magnitude—is that of preventing the industrial klondykes of the last century becoming the ghost areas of our day and age. Unless we have bold and dynamic plans, wider in scope and purpose—

The Deputy Chairman: Order. With respect to the hon. Member, I suspect he has exhausted his capacity for staying in order on this Clause, and unless he can deal with the Clause he ought to resume his seat.

Mr. Morgan: I will resume by saying that this premium is a crude instrument. It is my wish and my fervent hope that this provision will be sophisticated by selectivity, and will be supplemented at an early date by an appropriate variety of other means of providing assistance to these areas whose needs are so acute.

Mr. McMaster: I shall resist the temptation to follow the hon. Member for Cardigan (Mr. Elystan Morgan) except perhaps to say that just as he has many doubts about the efficacy of this premium, so I find myself in support of it, and perhaps the best thing we can do is to pair off at the end of the debate to avoid further embarrassment to both of us.
There are many unused resources in this country. The Government's purpose in introducing the Selective Employment Tax was to encourage the redeployment of labour throughout the country; to get people to move from areas such as mine, Northern Ireland, Scotland, the Highlands and Islands, and other parts of the country, to areas where there was overheating and over-full employment. This policy has failed.
If people in Northern Ireland could not find employment there—and during the past five years a number of shipyard workers have been laid off—they had the choice either of seeking employment in the Midlands in for example the motor car industry, and accepting the risks and the ups and downs involved in that, or of going somewhere else, for example to Canada. Having packed their bags, it was open to them to go abroad, and I regret that many shipyard and aircraft workers took this course, which meant that their skills and training were lost to the United Kingdom as a whole.
When my right hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd) introduced his payroll tax—which I think was the forerunner of these measures, though it did not go as far—there was an intervention from a member of the then Opposition, and I would like to refer to it now because I think that it was extremely relevant. The speaker said:
The payroll tax is a bad tax. My hon. Friends and I have drawn attention on several occasions to its unfair incidence as between industries"—
and this will, of course, appeal to the hon. Member for Cardigan—
those which use a good deal of labour and little capital and those which are capital intensive and make less call on the country's labour resources".—[OFFICIAL REPORT, 4th July, 1961; Vol. 643, c. 1251.]
The hon. Member who said that went on to say that the payroll tax would put up the cost of living. The same argument applies to the S.E.T., and the speaker on that occasion was the right hon. Member for Huyton (Mr. Harold Wilson), now the Prime Minister.
I think that that reinforces the argument that many features of the S.E.T., to which this proposal is attached, are bad for the country. The payroll tax used the old method of the stick. Industry was discouraged from expanding, and new industries from setting up in the overheated areas of the United Kingdom. They were encouraged instead to go to the development areas. As the Committee will remember, Northern Ireland was exempted by my right hon. and learned Friend. This was an encouragement, but it was a negative one. This proposal goes much further. It offers a carrot to in-

dustry to go to the development areas, and this is why I am in favour of it.
The Government's proposals have been welcomed in Northern Ireland, both by the Development Council and by the Government. The Green Paper has been considered, and although there has been a certain amount of detailed criticism of it, on the whole the arguments presented in it, and in the White Paper which has followed, have been accepted. It will cost Her Majesty's Exchequer about £11 million per annum to help Ulster, and nobody can afford to turn up his nose at such a sum.
We in Northern Ireland suffer principally from the disadvantage of being too remote from the market. Our materials have to be imported, and our finished goods exported. This adds a good deal to production costs, and hampers the Government in their efforts to attract new industries there. I have developed this argument on previous occasions, and I do not intend to develop it at length now. Although we have succeeded in attracting a lot of industry to Northern Ireland particularly capital intensive industries by means of generous grants towards equipment and other capital costs, and by the provision of new factories, sometimes tailor-made factories, for the companies going there. Many companies, such as Chemstrand, I.C.I., and Dupont, which manufacture synthetic fabrics, filaments, and yarns, do not employ a great deal of labour. They are capital-intensive but not labour-intensive, and I think that we ought now to concentrate on attracting labour-intensive industries.
Instead of the regional employment premium, attached as it is to the S.E.T. which I do not like, I would like to see some other way of helping manufacturing industry. I think that there should he a direct subsidy to help them with their transport costs, but I believe that such a scheme would he extremely difficult to operate, and might fall foul of international agreements such as G.A.T.T. and later, perhaps, the Treaty of Rome if we enter the Common Market.
6.30 p.m.
Another frequent criticism of the R.E.P. is that the service industries will not benefit, but I attach little importance to this. Such industries in Northern


Ireland are bound to benefit from another £11 million. These industries live on the back of the manufacturing industries, which is no criticism. They are essential and contribute to the balance of payments, especially through such invisible exports as insurance and banking, as well as tourism, which is also a big dollar and foreign exchange earner.
Nevertheless, banking and insurance particularly are concentrated in London and not in the development areas, so one would not help these service industries by payments to them in the development areas, and, except for tourism, one would miss the target. The service industries are there anyway. Even if they are given a subsidy, the number of employees will not be greatly increased, but, as the general prosperity increases, they will expand to meet the demand.
Therefore, the correct help for the development areas is to help manufacturing industries. Then the resultant prosperity through the improvement and development of existing industries and the creation of new ones will help the service industries too. Northern Ireland has 9 to 91 per cent. of its male population unemployed and there is a pool of skilled labour. I argued through April to June of 1961 when we considered the payroll tax—this is curiously similar to the Green Paper's arguments and just as valid now—that the country is losing the benefit of this pool in the regions.
We cannot expect the skilled labour which is leaving Northern Ireland's aircraft factories, shipyards, linen and other contracting industries in the same way as labour is leaving coal mining and textiles in Great Britain to be redeployed to those areas where it is most needed. The Government have a social function to attract industry there.
It has been argued from this side that it is adding to the cost of manufacture, and I agree that if economists managed the country they would try to concentrate employment, by direction of labour or other means, in the most economic places, like the south of England and the Midlands, which are nearest to the market, but the Government must be concerned with social factors—

The Deputy Chairman: Order. The hon. Gentleman is getting, away from the

new Clause, which deals with the regional employment premium.

Mr. McMaster: I am trying to argue why I should or should not vote for the Clause and it is therefore relevant, I suggest, to put the arguments for and against the question of whether it will achieve its purpose. I shall try to keep to the points already mentioned.
This premium will encourage the expansion of industry in Northern Ireland and help to attract more industry. Alternative ways of spending the money have been suggested, particularly from my Front Bench, such as building up the infrastructure, but this can happen anyway and is more likely if industry is built up.
In its comments on the Green Paper, the Scottish Council mentioned the need for more training schemes. This premium is not exclusive and does not mean that more money will not be so spent. If it is effective, more will be spent on training schemes because they will have more point when industry needs more labour. There are very fine training schemes, ahead of the rest of the country, in Northern Ireland, of which we are very proud. These schemes and the infrastructure of roads, hospitals and schools will benefit from this direct expenditure.
It has been suggested that the money should be spread more widely to farming, tourism and other service industries, but this presents a grave risk. If the jam is spread too thinly, it might have no effect, and, therefore, the Government's help of £100 million should be funnelled into manufacturing industry so as to increase output and reduce reliance on imported manufactured goods.
This is a short-term measure. I said in the debate on the Green Paper that five years was too short for the R.E.P. to have full effect and was pleased when the Chancellor said that he would extend it to seven, tailing off for two or three years, thus making 10 in all.
My own Front Bench has suggested that this scheme will encourage manufacturers to be labour-extravagant, but will any manufacturer who knows that it will last for only seven years do so? Before undertaking a heavy capital commitment on a new factory, manufacturers think further ahead than seven years, and although they will, of course,


use the scheme to the utmost they will take a longer view—

Mr. Higgins: What is relevant here is that in making an investment decision about how labour-or capital-intensive a project should be, one necessarily gives great weight to the fact that some costs are more important, because more immediate, and one must take into account the time value of money. This is why this proposal is likely to result in an initial investment in industry which is too labour-intensive.

Mr. McMaster: I grasp that point, but the scheme's effect, even though it will last for only seven years, will not in the long run be a concentration of industry on employing labour. Why should industry not be labour-intensive anyway? If labour is the cheapest way of producing goods in an area with a surplus, should they not decide in the country's interests, to concentrate—I am talking of marginal industries where there is a marginal difference between a new machine and new labour—on employing the unemployed rather than using expensive machines, always remembering that the scheme will tail off after seven or 10 years and one will have to transfer to new machinery?
It gets the factory started and the economy moving and brings in increased resources, particularly the scarcest of all, labour—

Mr. Gower: Would my hon. Friend not accept that the present world trend in the most sophisticated economies is that labour is fast becoming one of the most expensive items and that policies which produce that effect would run against the international tide?

Mr. McMaster: I agree. Labour is expensive, but I was talking about a marginal decision on whether to employ the labour and to start a factory or not to do anything. When a manufacturer, or the country as a whole, faces this decision, it is obviously better in the national interest, to employ the labour. After all, it is the manufacturer's concern to make a profit out of the labour, and by employing this labour he provides work and valuable production which we can consume or export. A scheme which is concentrated on manufacturing in an area

with 20 per cent. of the nation's manufacturing is both selective and effective.
I hope that the scheme will prove self-financing. The Government went a little far in the Green Paper to say that it would be completely self-financing. There will be a time lag, but I am sure that eventually the scheme will be self-financing, because it will create more industry to pay the cost. We will not see the end of the trade cycle as a result. The Government are a little starry-eyed to suggest in the Green Paper that, if unused resources are brought into production, enough new goods and exports will be produced to balance our payments and get rid of the cycle, which we have had since the war of recession, of boom and stop-go.
The Green Paper's suggestion that we would get rid of stop-go by this scheme is too much. As long as we have five year periods of Government, we are too likely to get into balance of payments difficulties, followed by restrictive measures which are replaced near election time by expansionist schemes.

6.45 p.m.

The Deputy Chairman: Order. The hon. Gentleman must relate his remarks to the new Clause.

Mr. McMaster: As a result of the new Clause and the forecasts that have been made—I consider them to be modest, particularly when it has been suggested that unemployment will be reduced by 50 per cent. in the development areas—the people of Northern Ireland will benefit. It will mean a reduction of 4 per cent. in Northern Ireland's unemployment rate. The ups and downs we have experienced in the trade cycle have been particularly severe in areas like Northern Ireland, more so than in the rest of Britain, and I trust that these measures will benefit the development areas.
Northern Ireland is a special case and is different from the rest of the United Kingdom. Our unemployment rate is much more severe. I am, therefore, bound to disagree with my hon. Friends who oppose this scheme. It will mean that £11 million will be diverted to Northern Ireland, and this is bound to help our economy. I appreciate why 80 per cent. of manufacturers, those in the rest of the country, dislike paying S.E.T.


to help the development areas. I also appreciate how competition from the development areas will eventually become an embarrassment to them. Nevertheless, the Government have a social duty to spread employment evenly and to help the less privileged areas.
If this task is adequately performed, it will benefit not only Northern Ireland but the country as a whole. While I do not altogether like the way the scheme has been tied to S.E.T.—I would have preferred to have seen it tied to the National Insurance scheme, with less dependence on S.E.T.—I would find it impossible to vote against the Government's proposal.

Mr. Donald Dewar: I wish briefly to comment on some of the arguments that have been used in my part of Scotland to combat the Government's proposals in the Green Paper and presumably will be used against the proposals in the new Clause.
The reception which these proposals have had in some quarters has been, to say the least, less than gracious, although I have detected a somewhat insubstantial note in the arguments that have been heard. This is largely because hon. Gentlemen opposite are unable to deny that about £40 million of welcome capital will be injected into Scotland's economy. As a result of this, opponents of these measures have been reduced on occasions to rather weak quibbles about the actual fiscal machinery that will carry this operation through.
In the Report of the Scottish Council (Development and Industry) it is pointed out—and this is one of the major props of the argument often used by hon. Gentlemen opposite—that, when looking at regional problems, there is no one easy panacea which is tailor-made to answer all the questions and difficulties. However, before coming to the Scottish Council's views, I should remind the House of the powerful case that exists for R.E.P.
I do not accept, in the pristine simplicity with which it is set out in the Green Paper, that the only result of R.E.P. will be a reduction in industrial costs in the development areas and, therefore, expansion generally at the expense of the rest of the United Kingdom and an increase in employment. That is far too

neat and comfortable a projection, and I sincerely accept the criticism, if it is a criticism, made by the hon. Member for Worthing (Mr. Higgins) that a fair proportion of the premium will be spilt over in increased wages and possibly in increased profits. However, as the hon. Member for Roxburgh, Selkirk and Peebles (Mr. David Steel) pointed out, this does not seem to be in any way a drawback to the proposals from Scotland's point of view.
I suggest that the new Clause and R.E.P. represent a certain degree of regional reflation which cannot be anything but welcome in Scotland; and that is the spirit in which I view the suggestion. It is difficult to project exactly what the effect of all this will be. One authoritative and, I believe, extremely reasonable projection has been made by the National Institute of Economic and Social Research in its May review of the economy. It states that there may be experts who would disagree with the way they have manipulated the regional multiplier, but the National Institute's projection—and its impartiality is enhanced by the rather jaundiced view which the same document takes of the Government's performance in other economic spheres—is that in about three to five years we can expect a job growth in the regions of between 60,000 and 80,000, with 30,000 in the first year of the operation. This may be a little optimistic, but if things turn out to be anything like that, we shall have nothing to complain about.
Consider, for example, the unemployment figures for June, 1966, which in the development areas stood at 113,000. One can see just what an enormously significant contribution, if the National Institute is right, the Government's latest proposal will make towards levelling out the unemployment statistics in the country as a whole. Obviously, if it does something—and I consider that R.E.P. must make some contribution—to decrease the pressure of labour demand in the areas of low unemployment and to reduce unemployment in these areas, it will have performed a valuable function. As the District Bank Review persuasively argued in its current issue, there seems to be no doubt that wage reflation is initiated in areas of low unemployment


and is transmitted from there to the rest of the country. There is a strong case for saying that R.E.P. will be effective and helpful in this sense; and I do not find the arguments against it in the least convincing.
It has been suggested that R.E.P. will go some way to encourage labour hoarding in places like Scotland. I wish to make my view perfectly clear. I do not consider that a labour-intensive industry is necessarily an undesirable industry or that there is something inherently inefficient about it. It cannot be called a "black" industry and it cannot be said that regions do not want it. There is a simple case for saying that we want to retain our labour in Scotland and that labour-intensive industries are, therefore, to be welcomed.
The circular which has landed on the desk of every Scottish hon. Member from the Scottish Clothing Manufacturers Association emphasises this. It is obvious that the whole system of incentives has so far been weighted, tilted, in favour of the capital-intensive firm. It has been worked out by Messrs. Bird and Thirwell of the University of Kent that a project which will have the same gross costs, whether inside or outside a development area, should, taking into account all the investment incentives, as well as the taxation concessions that exist, expect a variation in the net costs of that project of up to 30 per cent. depending upon whether a firm is inside or outside the development area boundaries. This illustrates the fact that we have this tremendous weighting in favour of the capital-intensive firm, and something which redresses the balance in the other direction is no bad thing.
A major argument used time and again in Scotland—an argument which is often plagiarised and lifted straight from the Scottish Council's Report—is that we want more efficient industrial retraining. The importance of retraining is an unexceptionable truth and no hon. Member will deny it. However, when one considers that only about 30,000 people a year pass through the total of Government training centres in Great Britain, one realises the enormous size of the problem and appreciates that it cannot be tackled by Government training centres

alone. A major effort in industrial retraining must take place in industry and there is no reason to think that firms will not use some of the new R.E.P. on these activities. The Scottish Council's own magazine quotes Glyn Davis of Strathclyde University, who pointed out in the Oxford University Papers that although there is a high unemployment rate in development areas like Scotland, because of the comparatively small size of the labour pool available, there is an enormously larger amount of labour idle for an expanding industry in the south of England and in other crowded areas. However, the Scottish Council, commenting on this argument, does not say—and this is more directly connected with the premium—that the real effective effort must be made for retraining by industry itself. Mr. Davis points out that if one looks at the pattern of labour, it reflects on the type of existing industry in the area. That is the conditioning factor, and that is where the effort must be made.
Despite the fact that the main arguments used against the premium are somewhat sketchy, I appreciate that hon. Gentlemen opposite, as well as those who oppose R.E.P. outside, will not be reconciled to this measure. The Government have shown a certain degree of flexibility by extending the period to seven years, with a tapering-off time. That, too, will not impress the critics of R.E.P., largely because they have got into their heads the idea that Selective Employment Tax is the basis of R.E.P. and that, therefore—they arrive at this theory by some simple and straightforward method of transference—R.E.P. must be bad. They have about S.E.T. some kind of advanced form of persecution mania.
In the debate on the Green Paper, Scottish hon. Members made a spatter of allegations to the effect that over half of Scotland's working force was employed in the service industries. From that, they have gone on to argue that because Scotland was victimised by S.E.T.—simply because it was a tax and a tax must victimise people—it will also be victimised by R.E.P. It is not accurate to say that more than half of Scotland's labour force is employed in the service industries. Indeed, even if it were, it would be only significant if this was a larger proportion


of the working force than in Britain as a whole.
The National Institute of Economic and Social Research—in some impartial, if not necessarily entirely accurate, statistics—estimated that the total number of people employed in the service industries in Scotland is 46·6 per cent., which is below the British average. If one takes the proportion of S.E.T. retained by the Treasury as a proportion of the total wages bill, one finds that Scotland comes out almost exactly in line with the British average.
My basic contention is that while S.E.T. is unpopular in Scotland—as I have pointed out, because it is a tax and because all taxes are unpopular—there is absolutely no case for saying that S.E.T. has victimised Scotland or has fallen particularly heavily on the Scottish enconomy. When one goes on to throw in R.E.P., since it is estimated that an extra £40 million will be added to Scotland's economy, the position dramatically changes and the whole thing becomes, to put it at its lowest commercial basis, a tremendous bargain for the Scottish economy and for the people of Scotland.

Mr. Higgins: The hon. Gentleman has quoted the National Institute of Economic and Social Research in support of his case. He will agree that the National Institute, when analysing the effects of S.E.T. in its publication issued in the spring of last year, clearly pointed out that its effects on the Scottish economy were definitely adverse.

Mr. Dewar: I was quoting the National Institute purely from the statistical point of view, remembering that these statistics were denied from the Opposition Front Bench when we debated the Green Paper. I am sensitive about this because I come from north-east Scotland, where only 25 per cent. of people are employed in categories 3 to 16 of the Standard Industrial Classification, which are the premium-earning categories. I am not totally indifferent to the argument which is often put forward, that because we are missing out on tourism and the service industries, the whole scheme is bad.
I confess that I would have been happier if, not necessarily through R.E.P. but perhaps via some other method, some concession could have been given to the tourist industries. If someone tried to argue that there is also a false distinction

in that when the government is talking about reducing costs, as the Green Paper does, it tries to maintain that service costs are not often as important as, say, the wages bill, I would be prepared to accept that argument. But we come back to the Scottish Council's original statement to the effect that one cannot have an all-embracing panacea.
7.0 p.m.
When talking of Scotland, and talking from a Scottish point of view, as hon. Members opposite very understandably and naturally try to do, it is no good making points that may have some plausibility in the North-East or the Highlands of Scotland and then try to pass it off as the picture for the nation as a whole. To do so is dishonest and a distortion and—I say this quite sincerely—it is unworthy of any hon. Member of any party.
I shall not dwell on the tourist industry or the service industries largely because I know that the arguments connected with them have been well rehearsed. I suspect that my right hon. Friends on the Treasury Bench have, for a short term at least, decided to harden their hearts, and it is inconceivable that I can sway them. I only hope that the signs of refinement in the Selective Employment Tax machinery as seen in respect of part-time employment and the regional variation may continue, and that, in the future, the position of the tourist and service industries may be reconsidered.
I recognise that the whole scheme is a tremendous disappointment to many people in Scotland who have an axe to grind. It is a very real blow to those who proclaim, in the face of all the evidence, the Government's supposed indifference to the fate of the Scottish economy. It is a very real blow to those who say that the Government have broken faith with the Scottish electorate and are not interested in revivifying the Scottish industrial scene.
From the speeches of many hon. Members—including many on this side, such as my hon. Friend the Member for Lancaster (Mr. Henig), who come from these so-called, and perhaps unfortunately called, grey areas, it is clear that those hon. Members are in no doubt about what the effectiveness of this regional employment premium is. I do not


for a moment believe that Scottish people share the narrow partisan arguments heard all too often in this House. My only regret is that hon. Members opposite cannot take the advice of the Scottish Council (Development and Industry) and "warmly welcome" what is "an important initiative".

Mr. Gordon Campbell: The hon. Member for Aberdeen, South (Mr. Dewar) rather typically criticised an imaginary case that he put forward as having been advanced from this side. I did not interrupt him, Mr. Irving, because I hoped to catch your eye, but I should now like to put the actual case rather than the one that he pretended to have been put from this side. It is easy oneself to set up a dummy case which has no relation to fact and then to knock it down, which is what the hon. Gentleman did.
I oppose the new Clause, not because I am against measures to even out the incidence of employment and unemployment over the country or measures to stimulate activity in the development areas, but because I believe this proposal is not the best method but the wrong method, both from the general point of view and from certain Scottish points of view which have their counterparts in other parts of Britain.
I will not argue simply on what the hon. Gentleman called the narrow Scottish point but on the very words used in the Green Book which I will quote later. The general arguments have been put in the general debate on the Green Book, and my hon. Friend the Member for Worthing (Mr. Higgins) put some of them very cogently today. I would refer to the article by Mr. Kenneth Keith in The Times of 23rd May which was headed "A Misuse of Economic Resources". The C.B.I. and other bodies have pointed out that there are other, better ways of employing about £100 million a year in the development areas and that those methods would be more likely to achieve the desired results.
My principal objection to the Clause relates to the areas which I will call special development areas. These are to be found in parts of Wales, the southwest of England, and the Highlands and

Islands and north of Scotland. Paragraph 49 of the Green Book states:
The Development Areas include some parts where an exceptionally small proportion (from 10 per cent. to 15 per cent.) of the total number of employees are in manufacturing industry.
That is a small proportion. It also states
The South West Development Area … the Scottish Highlands and Islands, mid-Wales and North West Wales are in this category.
The paragraph ends:
… it is clear that the net yield of the tax as a percentage of the wage and salary bill must be rather higher in these sub-regions than it is either in Britain as a whole or in the Development Areas as a whole.
From information we have extracted from the Government by Question and Answer, I would say that the words that it "must be rather higher" is an understatement. We know from replies given in this House that the amount of money taken out of the Highlands and Islands by the Selective Employment Tax, as a result of the very low level of refunds and premiums being paid in that area, because manufacturing industry provides only about 10 per cent. of employment there, is very high. This is admitted in the Green Book although, as I say, it is an under-statement.
This aspect of the matter, which was discussed quite fairly in the Green Book, is still valid but, unfortunately, it appears now to have receded from Government thinking. The Government are saying very little about it. They have in the past said that there are other ways of helping these areas. As an hon. Member opposite said earlier in this debate, a lot was said about the Highland Development Board. At other times the Government have said that the 45 per cent. investment grants in the development areas are helping but, unfortunately, these also work on a discriminating principle against service industry and in favour of manufacturing industry, which is such a small proportion.
Those areas that I would call the special development areas cannot be helped by the 45 per cent. grants, because little is eligible for the grants at all. It is a nought per cent. grant for most of industry there. As was illustrated in an


Answer today from the President of the Board of Trade to a Question of mine, transport, both for manufacturing and non-manufacturing industries, is not eligible for the grant, and the investment allowances have been lost. This accumulation of discrimination against a very large percentage of industry in these special areas will be accentuated if these regional premiums are adopted.
Two reasons are given in the Government's White Paper for this discrimination against the service industries. It is stated on page 6 that by limiting the premium to manufacturing industry there will be less pressure on demand, and on page 13 it is said that it is because of competition that the manufacturing industries in the development areas can then draw employment and extra work from the other areas.
I suspect that there may be a third reason. I suspect that underlying this proposal there is also a wish by the Government to support exports legally, on the basis that if we provide a subsidy which is on a regional basis it is not offending against international agreements. If that is so, it is a very indirect way of doing it, and I do not think that it is necessary. There are other and better ways of assisting exports.
I do not disdain or oppose the proposal that £40 million a year should be available for assisting the development areas in Scotland. But the question is, what is the best method of using this money? There have been two fundamental errors. The first is that which regards Scotland as just one of the regions, as just one of the development areas minus Edinburgh and Leith. What may be helpful to the industrial belt of Scotland, however, may be very unhelpful to the other regions of Scotland.
We normally consider Scotland in five regions—the industrial belt, which is the largest from the point of view of population and industry, and four others, which are large geographical areas in most cases and present quite different problems. What may be thought to be helpful to manufacturing industry in the industrial belt does not necessarily assist the other regions.
The second fundamental error is that the premium is based on the S.E.T. and therefore not only continues the

discriminations I have mentioned but the many anomalies in classifications as well as the creaking machinery for administration of the tax. The hon. Member for Aberdeen, South (Mr. Dewar) talked about the percentage of service industries in Scotland. The point which the Scottish Council made in its submission was that there were about 250,000 more persons employed in Scotland in the service industries than in manufacturing industry.
Of course, the Scottish Council was not talking about non-service, non-manufacturing industry such as farming, fishing, and forestry, which are yet another sector which has upset some percentage calculations. But the fact remains that the service industries, according to the submission, employ a great many more than the manufacturing industries do, and, as has been mentioned, the Government in their White Paper known as "The Scottish Plan" suggested that 60,000 of the 130,000 jobs they proposed would be in service industries.

Mr. Dewar: Does the hon. Gentleman maintain that this ratio is different in the United Kingdom as a whole? If it is not, it seems that the point he makes is not valid.

Mr. Campbell: The point is valid. But it is not easy to bring manufacturing industry in large quantities and quickly to a considerable part of Scotland. I have pointed out that, in the Scottish industrial belt, the premium—although there are general economic arguments as to whether it is the best way of assisting—can be earned by quite a large proportion of the industry there. But if one looks at the welfare of Scotland as a whole, one must consider the very large geographical areas where the amount of industry which will earn the premium is a very small percentage.

Mr. Dewar: rose—

Mr. Campbell: I shall not give way again. The hon. Gentleman made his point and I have replied. I dealt with this matter because he misunderstood what the Scottish Council said. I did not interrupt him because I thought that I could in my own speech point out what the Scottish Council actually said.
Within these special development areas, I am naturally concerned with the


Highlands and Islands and the north of Scotland, and so far I seem to have been the only hon. Member from that area to have had the opportunity to speak in the debate. At the same time, however, I recognise, as the Government did in their Green Paper, that some special problems arise in the south-west of England and Wales, for example. But, having referred to this in paragraph 49 and subsequent paragraphs, the Government allowed the matter to disappear. I would hate them to say later that they put this point out for discussion but no one had raised it. I have raised it at every possible opportunity and shall take every chance to do so again.
7.15 p.m.
The Government seem to have forgotten about paragraph 49, unless they can give a satisfactory answer tonight. The position, therefore, has been reached where, under the S.E.T. and the associated system of refunds and premiums, a great deal more money is being collected and taken out of the seven crofting counties of the Highlands and Islands than is being or can be put back in the foreseeable future by the grants made by the Highlands and Islands Development Board, which is the body mentioned in the Green Paper by the Government as an agency which might be able to help in the other direction.
One finds, therefore, that the money being collected from the Highlands and Islands, where it is a good deal more per job than elsewhere, is to be paid out in premiums—greatly increased—in the industrial belt of Scotland and in development areas where there is manufacturing industry in other parts of Britain. The funds remitted from the Highlands and Islands will be given out in Glasgow, Newcastle and places like that.
This must lead to depopulation. It must be a tendency towards depopulation. Yet the Government have said on many occasions that they are trying to stem depopulation. I hope that the Government will explain how they intend to put this right. They are positively encouraging new jobs, or the jobs they hope will remain in existence in manufacturing industries, which are bound to concentrate in the industrial belt of Scotland. It means that more men will be leaving the north of Scotland and

the Highlands if the purpose the Government intend under this system is carried out and this money is given to jobs in manufacturing industries which can only be set up to a minor extent in such areas as the Highlands and the North. This will make the anomalies worse, and I cannot see how the scheme, although I concede that it may have some benefits for the industrial belt of Scotland, can do anything but damage to those parts of Scotland I have mentioned.

Dr. David Owen: I welcome this Clause. I come from what I suppose is an area which would be described as a grey area and which has much claim to be a development area. Whether Plymouth becomes a development area or not, I believe that the premium is an extremely imaginative piece of fiscal policy, and as one who, in the last Budget, made representations to the Chancellor to introduce regional flexibility in the S.E.T., I welcome this proposal and, in the particular economic situation of the day, its emphasis on manufacturing industry.
The debate has been somewhat parochial. Everyone has argued the case from the point of view of his own constituency interests. Essentially what we are after is a control of the national economy. What we are desperately trying to do is to remove the regional imbalances and the very high areas of unemployment which exert strong social pressures on the Government to take economic policies which can be counter-productive and which are certainly one of the major factors in the stop-go economy. The Government's long-term economic policy has my full support, and I regard this proposal as a strengthening of their armament in this respect.
It was interesting that the hon. Member for Belfast, East (Mr. McMaster), in a difficult speech, made quite clear that he does not support his own Front Bench. He drew attention to the benefits which will accrue to Northern Ireland from the regional employment premium. Some people talk as though this were a new idea but, in 1962 a labour subsidy was proposed for Northern Ireland. It was discussed very fully, but it was not acted on at the time. We have had a capital subsidy for a considerable time now, and what we need


is an extended range of measures, including the introduction of this labour subsidy.
I turn now to the points made by the hon. Member for Worthing (Mr. Higgins). The hon. Gentleman implied that the T.U.C.s support for the regional employment premium scheme was given purely on the basis that the unions could expect higher wages in the regions. This is a very cynical interpretation. I am sure that the main support of the T.U.C. for the proposal stems from the fervent belief that it will reduce unemployment in the regions. This is the principal reason why the T.U.C. is enthusiastically supporting it.

Mr. R. J. Maxwell-Hyslop: rose—

Dr. Owen: No, I shall not give way. The debate has gone on a long while, and time is now short. The hon. Gentleman has only just come in, and I would rather give way to someone who has been present in the Chamber for a longer time.
I was saying that the trade unions support this proposal because of its central basis as a measure intended to reduce unemployment. I am, however, critical of one aspect of it. The Government believe that the scheme will be self-financing. I hope that they are right, but, in the next few years, it will undoubtedly produce an inflationary pressure until it begins to produce some form of payments back. This is extremely worrying in our present situation. Now is not the occasion to argue the short-term aspects of the Government's policy—I have done that in the Budget debates—but I must say that I remain deeply critical of it. I see nothing in the measures being taken at the moment to encourage investment in industry. I see nothing in the present measures to encourage an export-led boom. In January and February, it was reasonable to hope that we were in for an export-led boom, but there is precious little evidence of it now. There is no indication yet of any form of reduction in imports. In the long term, however, which is what this argument is about—it is not a short-term measure at all—inestimable benefits will accrue.
The hon. Member for Worthing said that, in some strange way, the regional

employment premium would encourage manufacturers to invest in equipment which would use a lot of labour. I do not believe it. I am glad that the hon. Member for Belfast, East took him up on the point. If it were to be a permanent premium staying for all time, that might be so, but it is to stay for only seven years and then taper off. But, apart from that, we have an extensive capital subsidy already, and the capital subsidy is more than the labour subsidy. The hon. Gentleman's argument does not stand up.
In an intervention, the hon. Member for South Angus (Mr. Bruce-Gardyne) raised a point which he has tried to make on previous occasions, both in letters to the Press and in an intervention during the speech of the First Secretary of State the other day. He says that the regional employment premium is inextricably linked to the Selective Employment Tax, to which he has a great aversion. It is not so linked. The First Secretary of State denied categorically that it was, in immediate response to the hon. Gentleman's intervention, so how he can continue to pursue the point I do not know.

Mr. Bruce-Gardyne: rose—

Dr. Owen: No, I shall not give way. Time is short.

Mr. Maxwell-Hyslop: On a point of order, Mr. Irving. We are not subject to a timetable resolution. Time is in no way short, is it?

The Deputy Chairman: Order. That is not a point of order.

Mr. Bruce-Gardyne: If the hon. Gentleman will read HANSARD, he will see that the First Secretary of State's answer to my intervention last week was that the Chancellor of the Exchequer would deal with the point I had raised when he replied to the debate. Needless to say, the Chancellor did no such thing.

Dr. Owen: The hon. Gentleman gives me the opportunity to read the relevant passage in HANSARD. My right hon. Friend the First Secretary of State said:
… this and the S.E.T. do not integrally and inevitably fit together. It is true in form that the one has come out of the other, but they are not necessarily inseparable."—[OFFICIAL REPORT, 5th June, 1967; Vol. 747, c. 660.]


That makes the matter clear. If we wish to separate them, we can. If we have an added value tax, as I hope we shall, and if the Selective Employment Tax is done away with, we can still retain the regional employment premium, which, in my view, is of considerable benefit. I would not like to see it go.

Mr. G. Campbell: rose—

Dr. Owen: No, I shall not give way. The hon. Gentleman has already spoken. This debate is going on for a long time—[HON. MEMBERS: "Give way."] I shall not give way. There are many other hon. Members who wish to speak.
This is the central issue which I want the Government to understand. They have, rightly, concentrated at present on manufacturing industry, but there is a real case for the tourist industry to be treated as a separate industry. I want this question to have close examination. It may well be that the tourist industry can be helped in ways other than by a regional employment premium, but I have no doubt that it has considerable benefit to give to the country and it should receive assistance.
Regions such as some parts of the Highlands of Scotland, the North-West and North Wales do not gain much benefit from the regional employment premium. My own region of the South-West does not gain much benefit, but this is no reason for not supporting it. If it will produce benefit for the nation and be of national value, hon. and right hon. Members ought to be able to look a little further than their own constituencies. I urge the Chancellor to regard the tourist industry as a separate concern and, if possible, bring forward proposals to help it. I must warn my right hon. Friend that the short-term economic outlook for this country is causing many of his hon. Friends grave concern, but, for the long-term, this imaginative piece of fiscal policy is warmly welcomed.

Mr. Ian Lloyd (Portsmouth, Lang-stone): I wish to make a few pertinent comments on the Clause and on the arguments advanced in a number of Government documents advocating the policy which it embodies. Some of my remarks may be judged impertinent, but I hope

that I shall succeed in staying within order.
First, I take issue with an argument used by the Chancellor earlier today. He emphasised that one of the main considerations in the Government's thinking in determining this measure was the lack of trained skill. His words were to the effect that "Expansion, when it comes, falters because of the lack of trained skill". I subscribe wholeheartedly to the view that the British are among the world's most skilful and ingenious peoples and that in this resource lies, perhaps, 99 per cent. of our greatness, but I would argue strenuously that, in the last decade or two, too much of our available skill has been either untrained or obsolete. Too much of our skill has been absorbed artificially. We have had too much concealed unemployment and misemployment.
Whenever we discuss this subject in the House of Commons, we talk as though we are up against the extreme limits of available labour all the time. I believe this to be wholly untrue because, basically, the situation is artificial. The decline of the shipbuilding industry, one of the major industries which the Chancellor hopes to help by these proposals, could be attributed in large measure to the serious misemployment and over-employment which has existed in the industry, probably for half a century, as a result of a whole range of economic and social restrictions which I need not go into now.
Next, I take up the question of the shrinkage of numbers employed, the implication being that it is something to be avoided. This argument, too, cannot be sustained. Shrinkage of numbers employed is in itself a neutral phenomenon. It is taking place in all the most efficient agricultural countries of the world. Shrinkage in numbers is a world phenomenon in the developed agricultural countries. In shipbuilding, too, the surviving efficient shipbuilding nations are those in which there has been a prevailing and significant shrinkage in the numbers employed. The argument could be put another way, that if the shrinkage is associated, either geographically or economically, with a rise in real incomes, it is something to be welcomed. It is on the rise in real incomes rather than on the shrinkage in numbers that we should concentrate.
7.30 p.m.
I turn now to a point made by the hon. Member for Aberdeen, South (Mr. Dewar), who said that labour-intensive investment was the investment most required particularly in Scotland. Here again, the argument is fallacious. It is not labour-intensive investment we require or, necessarily, capital-intensive investment. The choice is not between labour-intensive and non-labour-intensive firms; it is much more fundamental. It is between a high and rising national standard of living with largely capital-intensive firms and industries employing whatever labour is needed and economically justified, however the total results of that developed national output may be distributed, and investment in less capital-intensive firms producing a low or lower national standard of living. These firms are being compelled artificially—usually by legislation but there are other compulsions—to employ whatever labour is deemed by some all-wise bureaucrat to be necessary. That is the real choice facing us.
Let us forget about the argument about labour-intensive and capital-intensive industries and go to the real crux of the problems. I should like to give a specific example. The world, and Britain with it, is on the verge of what is known as the container revolution. With this capital-intensive method in the United Kingdom the whole dry cargo trade can probably be handled by about 5,000 men. Without it, using the labour-intensive method, it can be handled, as it very largely now is, by 50,000 men. What is the choice? What are the consequences for the national economy? They seem to me to be perfectly clear. The important point is that this choice should not be obscured either in narrow sectors or in the broad national sector by legislation which tends to emphasise artificial criteria.
The Green Paper refers to the mobility of labour and implies that outward migration from the development areas has exceeded
… the degree of geographical mobility of labour which is socially and economically desirable".
I should like to ask the Chancellor of the Exchequer what is the degree that is socially and economically desirable. How is it defined? Is it static through time?

If it is not, how does it change, how is it affected by rising standards of living? How is it affected by the rising ratio of standards of living comparing one area with another. How is it affected by the availability of housing? That is probably the most important point. We should know what is in the Government's mind. I leave it at that.
The question of service industries has been rightly emphasised and I do not wish to say much more about it. But the word "physiocrats" was produced by an hon. Member opposite, and there was a suggestion that it was an obsolete concept. Going by the sort of judgments made by the Government today, I suggest that it is not physiocrats but "physicalcrats" who seem to dominate our thinking. I could summarise their attitude by saying, "If you can see it, subsidise it. If you can't, tax it."
The Government argue further in the Green Paper that there will be no effect on the balance of payments, and that argument should be taken very seriously by the House. In paragraphs 33 and 34 of the Green Paper there are what purport to be arguments sustaining that proposition. But I contend that they are not arguments; they are assumptions. They are an act of economic faith. But, as I see it, it is not the task of economists anywhere, never mind those who advise Governments, to have faith in their proposals. I have always understood that their task is to demonstrate the case as fully as their data and assumptions permit.
It is not demonstrated in the Green Paper. As far as I am aware, it is not done anywhere else, and it should be. I do not believe this particular set of assumptions. I do not believe paragraph 33 which states that:
There are strong grounds for holding … it is believed that … there should be … it is believed that …
and so on. This is not a convincing argument, and I hope that the Government will succeed in producing others, although I doubt if they can.
It seems to me that the argument which underlies much of the thinking behind the R.E.P. is that there is excessive demand in certain situations which cannot be controlled as effectively as the Government would like because it spills over into the development areas. I am not


convinced by that argument. It seems to me that when this excessive demand is concentrated on those industries in which expansion of output automatically creates a positive balance of payments effect, and when it is possible to define and isolate those industries, we are getting somewhere.
Of the low import-content industries, tourism has been rightly emphasised, as well as hotels and entertainment. I should like to add electronics and scientific instruments. Every hon. Member can have his own list, and most of our lists would overlap. It is especially in these industries of expanding output and high positive balance of payments content that we should encourage development, investment and employment. We should do this wherever those industries can be found, and not submit them to artificial criteria, wherever they exist. We have too few of them. This measure does not necessarily create this type of industry, but it is certain that it places a specific burden on it wherever it exists outside the development areas.
It is reasonable to suggest that, as I am speaking critically of the proposal, I might have alternatives. Do they exist? I should have thought that there were two perfectly reasonable alternatives which the Government could bring forward and which they would have to support if they were really serious. I recently had an opportunity of seeing the tremendous economic attraction provided by the free port concept, such as Shannon in Eire and Copenhagen in Denmark. Why do the Government not create some free ports in the development areas? If they are really serious about their intention to benefit these areas, the attraction provided to industry in free ports would be quite certain, quite dramatic and quite effective.
There is another and possibly more difficult line of incentive which the Government might consider—the rate of personal taxation. Why have not the Government devised a scheme providing that all those subject to personal taxation—because ultimately incentive operates at the personal level—should pay 10 per cent. less at all levels? Possibly the development areas would have to be defined much more carefully and specfically,

but what a dramatic effect this would have on the desire of people to go to development areas, to live there and endure the lack of social amenities and various other disadvantages! What a flood of economic activity would follow such a scheme! If the Government are really serious about their intention to help and not simply to sit aloft and aloof in Whitehall and operate the puppets on the strings, that is the sort of thing they should be thinking of doing.
The Green Paper has questioned, in effect, the ultimate result of the withdrawal of the R.E.P. This suggested to me that it was really a form of tariff barrier that the Government are erecting for these areas, a tariff barrier of, perhaps, at least 2 to 3 per cent., behind which industries in those areas can shelter. Those of us with experience of tariff barriers know that they are seldom effective. The uniformly affect old industries, which are either efficient or inefficient, and new, which are either inefficient or efficient. Only about 1 per cent. of all tariffs are justified, and those are usually not needed.
To sum up, it cannot be escaped that the proposal is essentially to build a bad subsidy, which will be bound to build up considerable political and economic vested interests, on a bad tax. I have heard no argument today to convince me that the contrary is the case. Is there an ulterior motive behind the proposal? Are the Government attempting to create a situation in which, in the course of time, so much will have been invested and so much employment created on this artificial basis that no Government, irrespective of party, will be able to unscramble the mess? I have a vague and lurking suspicion that that is so. I hone that the Chancellor will succeed in disabusing me of it.
Finally—and this is the most important point of all—who pays for this? The map shows who pays. Broadly speaking, it is the South. I happen to represent the city of Portsmouth, but I do not regard it as a particularly wealthy city, and vet under this scheme it will subsidise Plymouth and Liverpool.

Mr. Peter Bessell (Blodmin): Plymouth is not in a development area—I wish it were—so that it will not be subsidised by the city of Portsmouth.

Mr. Lloyd: The hon. Gentleman is quite right and Plymouth is outside, but certainly Liverpool is in a development area and my point is not invalidated. Portsmouth will have to subsidise Liverpool, Newcastle, Glasgow, Edinburgh and many other cities. This is a monstrously unfair imposition to place on the people of Portsmouth and many other cities in the South.

Mr. Mendelson: On several occasions my right hon. Friend the Chancellor of the Exchequer has said that this proposal is in general line with his economic policy. Before dealing with that, I want to give a general welcome to the Government's intention to deal with the special and urgent problems of the development areas. The way in which the hon. Member for Portsmouth, Langstone (Mr. Ian Lloyd) spoke setting one part of the country against another, represented the kind of backward thinking to which we are accustomed from him on all sorts of subjects.
I support and have supported measures to encourage employment and investment in development areas, but I am not prepared to accept such a policy as a substitute for the other essential economic measures which are required by the country as a whole and by the development areas. I have in mind certain remarks of the Chancellor, starting with his Budget statement, about the problem of finding 100,000 jobs, most of which would have to be allocated to the development areas, and his view that if we succeeded in that we would then be in sight of the solution to our economic problems.
I dissent from that point of view. If the Government confine themselves to the measures so far advanced, including this, and do not take radical steps in the immediate future to encourage investment throughout the country, including the development areas, the policy will fail. Certainly it will not bring us closer to a solution of our general economic problems. This is a matter of cardinal importance. The Chancellor seems to be creating the illusion that the provision of 100,000 new jobs in the development areas will produce a solution to our general investment problem. I believe that to be profoundly incorrect.
Since the Budget I have seen reports from bodies, such as the National Institute

for Economic and Social Research, proving conclusively that it is the lagging of investment which is the root of our problems. On several occasions the Chancellor has referred to his expectations of growth in the economy, but the policy embodied in this proposal, which I support, will not bear the desired fruit if at the same time there is not a general all-round increase of investment in the economy within the next six months so that it can percolate through all areas, including the development areas.
7.45 p.m.
But crucial investment decisions are not based on tax allowances or special premiums. As my right hon. Friend the Chief Secretary knows very well and has known for a long time, probably longer than I have known this truth, essential investment decisions in board rooms are based on the expectation of selling the goods produced at a reasonable profit at the other end of the line. Allowances and premiums are no more than additions and they cannot take the place of that expectation of reasonable profit, because no allowance and no premiums will affect those crucial investment decisions unless there is a prospect of selling the goods. I therefore hope that there will be a clear declaration from the Government that this proposal is not meant in any way to be a substitute for a general economic policy of encouraging investment, a policy which must be urgently pursued by increasing consumer demand, so that this and other measures can bear fruit for the good of the development areas and the country as a whole.
This afternoon, the Chancellor rightly drew special attention to training for skills. If we were able to make more progress in this direction, many policies to aid our export effort would be much better advanced. Unfortunately, we are not doing all we can to improve training for skills. The Chancellor was speaking particularly about development areas, but I am thinking also of the old industrial regions.
I am glad that the Chief Secretary is a senior Treasury Minister, because the specific problem which I want to put concerns him as a Treasury Minister as much as the proposal which we are now considering. There is a limited number of training centres and it is generally


agreed—and I was glad to hear the Chancellor say this—that the best kind of training occurs in the firm, in the plant, where there is much accumulated skill and experience. It is physically impossible in the time available to expand the number of training centres; they cannot do what is required with present resources, and therefore retraining must take place in the plant. In addition to that, special training can often best be undertaken in the plant, especially when a man is changing from one skill to a slightly different skill.
However, there has been an unfortunate development. There are two firms in my area of South Yorkshire, as there are others in other parts of the country, which have developed excellent schemes for retraining in the plant. About 12 months ago, a number of men were facing a crucial decision. The management was declaring their jobs redundant and the men were perfectly entitled under the Redundancy Act to expect a redundancy declaration and immediately to apply for redundancy payments, which, as the Committee knows, would not be subject to tax.
At about that time the firm concerned developed an excellent internal retraining scheme. It told a number of the men affected, "You have acquired valuable skills in the steel industry and invaluaable experience. Unfortunately, your jobs are coming to an end. You are perfectly entitled to ask for redundancy payments, which will be tax free. However, we ask you not to leave. We have instituted an internal training scheme and we intend to train you for another job. We have taken advice on this matter. Let us assume that you have been earning £24 a week. During the period of training we will pay you £14 a week. We cannot possibly pay you the full rate".
The employers went on to say: "In addition, we will make up that wage of £14 to 95 per cent. of the wage you previously earned for the period during which you are being retrained. We have taken advice and we can tell you that this additional payment will not be subject to Income Tax, so that you will be placed on terms of equality with people who make the alternative decision; that is, you ask for your reundancy payment

and then you do not have to pay Income Tax on it".
These men accepted this proposal in the knowledge that they would not have to pay Income Tax for that additional payment. Nine months later the management had to come to the men and say that they had been mistaken and they would now have to pay retrospectively full Income Tax on these additional payments.
This is wrong and unhelpful in many different ways. First, it is wrong because it will have a discouraging effect on these firms and others in the steel industry going ahead with their internal retaining schemes. Secondly, the trade union executives who originally thought up this idea are being approached by steel workers, whose jobs are being declared redundant because of inevitable technological advances, who are asking "What position are we to take?"
Even if my right hon. Friend cannot give an immediate answer, I suggest that the Government should think again. I advance two grounds: one is efficiency and the other is equity. If some people accept the redundancy payment, which is tax free, and others make the other choice, they ought to be equally treated. There is involved here the important principle of treating taxpayers alike. Industrial efficiency and the future of retraining for other skills, which the Chancellor mentioned, is bound to have a seriously discouraging effect, and these people who have acquired experience and skills in the steel industry, or any other industry, will leave and might never come back. This is the great fear of these firms and the trade union representatives of these men, and I have been asked by them to put this point in some considerable detail.
I have spent a little more time on that point, because I thought that by discussing a number of details, as well as the Government's general economic policy, we could best advance the sort of purposes that the Chancellor put to the Committee earlier.

Sir John Gilmour: When one is being offered in one's own constituency or elsewhere a premium of 30s. it seems stupid to turn it down. But, having listened to the debate, I am more


than ever convinced that as the Selective Employment Tax in many cases takes money from people who can ill afford it and pays it to those who do not need it, in the same way the regional employment premium will channel a very great deal of money to people employed willy-nilly in the industries in which they are at present working. Therefore, I do not think that it will in any way help the long-term solution of our economic difficulties.
A practical illustration of an industry which has come to Scotland in recent years is the motor car industry. What effect will it have on building up this industry in Scotland? Will it produce cars more cheaply from Scotland? Will it lead to cars from Scotland taking a bigger share of the market as a whole? What sort of impact will it have? Nothing has been said which in any way leads me to suppose that it will provide the stimulus to industry that we need.
One other quite different and unrelated point about which I was not quite clear when the Chancellor introduced the Clause is what happens over short-time working. I paid several visits to industrial concerns in Scotland last winter. They were working a four-day week. By working from Monday to Thursday in one week and Tuesday to Friday the next week it was possible for the people concerned to draw four days pay a week from their firms and to draw two days unemployment pay a fortnight. This was arranged between management and unions to make certain there was no industrial strife and people did not have to be paid off.
The Chancellor said that if one worked for 21 hours one would draw this premium. Does it mean that if people are put on permanent short-time working, to obviate, if you like, paying off members of a firm's staff, they will be able to draw the 30s. a week, although they are only working four days a week?
My hon. Friends have deployed all the arguments necessary to show that there are many other ways in which this £100 million could be better spent, but no argument has been developed to show that it will certainly help those parts of the country which are outside the big industrial centres.
My hon. Friend the Member for Moray and Nairn (Mr. G. Campbell) made the

point that the central belt of Scotland has over past years had a considerable amount of money spent on it to help it develop. What happens is that it draws and attracts labour from outside the central belt to fill up jobs there. What we need is something which has an element of discrimination to make it much more attractive to go to the areas where there are not the same facilities as in the major industrial areas. I cannot see that the proposals which the Government are putting forward will deal with the long-term employment prospects for Scotland, Ireland or any other part of the country where we suffer from a high level of unemployment.

Mr. Arthur Davidson: I should like, first, to give a general welcome to the regional employment premium. The benefits which it will bring to the development areas are so obvious that I am surprised that some hon. Gentlemen opposite have seen fit to criticise it. But my enthusiasm would have been greater—fulsome to the extreme—had the Government included Lancashire—in particular, the Lancashire cotton belt. The Lancashire cotton belt has problems peculiar to it, similar to those facing the development areas themselves.
Speaker after speaker has catalogued the features of the development areas, and all of them could have applied to the Lancashire cotton belt. I will detail one or two of them. A poor rate of economic growth applies to Lancashire. The drift away of younger people to seek work in more attractive industries elsewhere also applies to Lancashire. A resultant distorted age structure amongst the existing population applies to Lancashire. Poor communications, excessive travel to work, and a need to revitalise and modernise towns certainly applies to Lancashire. Above all, over the years there has been a massive contraction of the two industries upon which Lancashire's prosperity was built—coal and cotton.
8.0 p.m.
The problems of the cotton industry are well known in this Committee. They have been ventilated on other occasions and I am sure that I would be out of order were I to detail them now. But what are needed in Lancashire are new industries, growth industries, to replace the older industries. While I welcome the premium as it will affect the development


areas, we in Lancashire fear that the greater inducement that the premium will give to firms to develop will mean that existing firms in Lancashire and firms which are thinking of going there will find the lure to develop elsewhere irresistible.
I am sure that the problems of Lancashire are well known to the Government. I raised them in an Adjournment debate which was not exactly over-crowded nor over-reported. I got a not unhelpful reply from the Government. They showed that they understood the problems. Previous Governments have also understood the problems of Lancashire. But understanding the problems is not sufficient. The Government have shown that they understand the problems of development areas and have done something about them. What I am asking the Government to say today is not only that they understand the problems of Lancashire and of the region of Lancashire in which my constituency is situated, but that they will give practical assistance to induce industry not only from outside to go to Lancashire but, in particular, to induce and give help and new incentives to industry already in Lancashire to expand and develop.
I hope that my observations will be passed to the Chancellor because he specifically asked that no further mention should be made of areas as "grey areas" and I have somehow miraculously succeeded in talking about Lancashire without mentioning those words.

Mr. Peter Bessell: The main points which caused the Liberal Party to support this Measure were put forward by my hon. Friend the Member for Roxburgh, Selkirk and Peebles (Mr. David Steel). There are only two points I would like the Committee to consider in addition to those which were made by my hon. Friend, who understandably confined himself largely to the effect of the premium upon the areas of Scotland which come into the development category.
The development areas as they are at present designated under the 1966 Act are, of course, valuable in that most of them are areas of high unemployment, depopulation, ageing population and where it is difficult to find employment

for young people. But it is unfortunate that this measure, which has considerable merit, will not apply to areas within development areas where there is a serious unemployment problem. I can best illustrate this by taking the case of three towns in my constituency, Torpoint, Saltash and Gunnislake. All are places of difficulty.
Torpoint and Gunnislake in particular have a very high unemployment record and although almost the whole of Cornwall is designated as a development area and will benefit from these proposals, these three towns, which have greater problems than the majority of the development areas in Cornwall, will receive no benefit whatever either from this scheme or from many other schemes which have been put forward by the Government for the assistance of development areas.
This is because of the utter absurdity of the method whereby development areas are designated. They are based not upon unemployment nor upon the need to develop certain derelict areas. On the contrary. They are decided by the existing labour exchange areas of the Ministry of Labour, and the exchange area into which Gunnislake, Torpoint and Saltash fall happens to be the Plymouth area and it is therefore assumed, because there is no high unemployment in Plymouth, that there is no need to make a development area of these three towns.
The absurdity of this is illustrated by the fact that communications between these towns and Plymouth itself are quite inadequate. In the case of Saltash, admittedly there is a bridge connecting the borough and the city of Plymouth across the River Tamar and in the case of Torpoint there is a ferry service. In the case of Gunnislake, there is a relatively long train journey, and Gunnislake has as much as 13 per cent. of the employable population on the dole.
I appeal to the Chancellor to consider seriously whether this measure should not be applied to areas like these, which are literally within a development area but are excluded because of the absurdity of the machinery whereby the 1966 Act is operated. There is nothing to prevent this being done. It is a simple matter for the President of the Board of Trade to make an order. He can do it under Section 15(2) of the Act. He may vary


or revoke or change in any way he chooses the areas which are designated as development areas.
If the premium is to have the effect that is intended by the Chancellor in providing additional employment and additional industry where it is really needed, I ask him to make representations to the President of the Board of Trade to make certain that this really happens, because, as the position is at the moment, it is only an irritation to those people who have been unemployed for a long time to know that there is no possibility of this measure helping them.
It is also an irritation to those employers who have had the courage and foresight to set up their factories in areas like Gunnislake, Torpoint and Saltash and who have not received any assistance from the Government because these places are outside the development area and who, despite this, have continued to go ahead with their plans, providing employment for the local population and thereby helping to stabilise a declining economy. They are doing this without any Government assistance. When a measure of this sort is put forward and we are asked to support it—as we must, because any gift horse is better than none—it is extremely irritating to these employers of labour within the framework of the development area that they will not receive any benefit.
My hon. Friend also mentioned the real risk that this measure represents to some of the service industries. I have in mind particularly the hotel and catering industry, again as it is within Cornwall. For example, one of the development areas is the seaside town of Looe. There is no need, I assure the Chancellor, to provide incentives to build factories in a former fishing village which is rightly regarded as one of the most beautiful spots in Cornwall.
There is no need to provide an incentive to employers to establish factory buildings in Looe or Fowey or Polperro. There is every need to provide incentives in Gunnislake, Milbrook and Torpoint, and yet if the prospective employer of labour, the man who has decided that he will open a factory in a development area, has chosen Cornwall as the place to do this, one writes to the Board of Trade and asks for information, he will

discover that he can receive all of these benefits, including the one which we are now discussing, provided that he opens his factory in Looe, but he cannot have them if he opens it at Gunnislake.

Mr. Diamond: I hesitate to interrupt the hon. Gentleman, but I assure him that I have listened very carefully to him, and I cannot help him in all that he says. I am only dealing with the new Clause before the Committee. I can convey what he says to my right hon. Friend the President of the Board of Trade, but I gather that he is not saying that this is in any sense detracting from the arguments of the new Clause before the Committee.

Mr. Bessell: I ask the right hon. Gentleman to accept my assurance that I am not opposing the measure. What I am saying is that it has been brought forward without proper consultation between his right hon. Friends the Chancellor and the President of the Board of Trade. The effect of this proposal will be to provide additional employment to promote new factory development in certain parts of the development areas. It will often be the case, as in my constituency, that it will provide incentives in the very place where they are least needed and where they could have a serious effect upon the tourist industry.
I am certain that the Chief Secretary will agree that it is vitally important that we should do everything possible to improve tourist facilities, to attract foreign visitors, and provide them with the best possible accommodation. To bring a measure of this sort forward which, because of sheer bad planning and the absence of foresight, could have the opposite effect to that which we all desire in certain areas, does not mean that it will not be welcomed in the development areas as a whole. It will be, and it is right that it would be supported, if only for that reason.
At the same time there is a period between the deliberations of this Committee and Report when proper representations could be made by the Chancellor to his right hon. Friend the President of the Board of Trade, to see whether these provisions could not be extended beyond the existing development areas to those places attached to the development areas,


where this kind of assistance is most urgently needed. An alternative method would be for the President of the Board of Trade to make an Order to include these areas which I have mentioned, areas such as Gunnislake, Saltash and Torpoint, within development areas, and cease to be quite as hidebound, as he is at the moment, by the Ministry of Labour's designated exchange areas. This could be done.
The strongest argument for supporting this new Clause is the fact that it will provide an incentive, not only to employers to build factories within the development areas, and thereby assist in improving the general prosperity of the area, but moreover it should attract more people into the areas. One of the great problems existing in all the development areas which have been discussed by hon. Members on both sides of the Committee is under-population—a lack of young people able to do the work, if it is provided. The only way in which we can hope to increase the prosperity and improve the economy of the development areas is by increasing the population.
The only way of increasing the population, short of waiting for Nature to take its course, is to bring people in. If we are to do this we have to provide jobs for them to do. The most important aspect of this new Clause is the fact that it should provide the incentive for employers to set up factories and provide opportunities for employment within the development area, thereby attracting to the area the additional population which is essential if one is to have viable economic units in places such as Cornwall, West Wales and Scotland.
I do not share the fears which have been expressed that this would work to the detriment of the existing employers. On the contrary, I believe that the employers in industry will benefit generally—those who are there already as well as those who, we hope, will come in future. What is worrying me is that it may detract from the service industries, particularly the restaurants, hotels and other industries catering for foreign and British tourists. I hope, therefore, that the Chancellor will put right the two fundamental errors in relation to this new Clause.
The first one which I elaborated earlier, is that the benefit should extend to those

areas which are not included within the development area, and yet which geographically, are a part of it. The second point was that he should also find some means of providing assistance to those service industries helping our balance of payments, which are so essential to the economic growth of certain regions, such as the hoteliers and others associated with tourists.

8.15 p.m.

Mr. Robert Sheldon: The reason for the introduction of the regional employment premium in this form was because from July of last year we were running below capacity in plant and in the supply of labour. Given a high employment rate, the advance factories, the training and retraining facilities, the I.D.C.s and investment grants, would have continued to work, without the need for the regional employment premium. The greatest incentive that can be devised for increasing employment in a region is a high level of employment generally, together with an availability of factories and training and ancillary services for the development area.
In the period when there was high employment, the reductance of manufacturers to go to development areas could not be mitigated by anything that was likely to be brought about as a result of the regional employment premiums. What is needed is high employment for a long period of time. What has happened, and this is shown in Table 2 on page 8 of the Green Paper, is that at a time when unemployment is beginning to rise markedly over the country unemployment starts shooting up in the development areas. It is because the periods of sustained prosperity have not been sufficiently prolonged that the really great problems have arisen.
There is no greater incentive to a manufacturer to move to a development area than his finding that he is unable to increase his production because he cannot get his labour locally. No regional employment premium is likely to make up for the lack of this incentive. There is a sort of relationship between the regional employment premium and investment grants, and this has to do with the changeover from investment grants from the period when there were tax allowances to the cash payments. The argument was made


many times that if one paid people to invest there may be a surplus of machinery, and this is wasteful. Although too much was made of this argument, there was something in it.
But what followed from this was that if there were excessive purchases of modern machine tools it would benefit the country by providing manufacturers with modern equipment and would disseminate skills which come from the wider use of advanced machinery. But when we subsidise firms to move into development areas and make it easier to get labour at lower rates the waste of manpower, which is the comparison to the waste of machinery, does not bring the advantages which surplus machinery brings. What this means often is that manpower is likely to be inefficiently employed. If it is argued that that does not matter as long as it is employed, that is hardly the course for a country such as ours which should be making the greatest use of its resources.
Previously firms moved into development areas because they could not get the labour which they needed in their own towns. These were industries frequently with highly automated plant and very considerable investment so that their urgent need for labour was greater than that of the labour-intensive industries because there was more capital per head of labour to be considered. They went into the development areas because they needed that production and not because it was marginally cheaper. Jobs were created in this way because of the high levels of employment.
Now we shall see large numbers of semi-skilled and unskilled workers brought into new industries. What I think is likely to happen is that after a time, when the employment premium is withdrawn, these firms will find themselves uncompetitive and will have to go out of business. Firms which produce no lasting benefit to the areas, no increase in skills and no benefit to the country are not suitable for an advanced industrial country such as our own.
There is reference in paragraph 40 on page 14 of the Green Paper to the possibility of serious difficulties arising when the time comes to remove the premium. It may well be that the R.E.P. will operate as a crutch for labour-intensive

industries which will find it difficult to operate once that crutch has been removed. Paragraph 26 on page 11 says that the R.E.P. is designed to produce the effect of high national employment without balance of payments difficulties by reducing the labour costs of manufacturing industry in the development areas, thus making it more competitive. I find it difficult to think of a solution which is less likely to make a firm more competitive than to hand it 30s. for every productive worker which it has. Will it rid us of one restrictive practice or initiate the production of one new article or new idea? To expect a firm to drop its prices by relying on the capital provided by a subsidy of 30s. is to misunderstand the way in which industry operates. The market forces are the forces which will finally determine whether the firm charges one price or a lower price.
What is at stake is upwards of 40,000 jobs. One can take one's choice. It may be 40,000 to 80,000 jobs, depending on the basis of one's argument. But taking the figure of 40,000, which is suggested in the Green Paper, £500 million will work out at a cost of £12,000 per job. If continued for seven years each job would cost even more. This might be acceptable for a highly capital-intensive job but the £12,000 is more likely to be spent in a job where labour costs are high. It is more likely to be spent in employing semi-skilled or barely-skilled workers. I should like to see an alternative way in which that sort of money could be spent more profitably.
The crux of the argument is the balance of payments problem. A sum of £100 million spent by the Government will not have the same inflationary consequences as the alternative. There are approximately 1½ million people in manufacturing industry in the development areas. They will receive about 2 or 3 per cent. subsidy. That subsidy is supposed to result in a reduction of prices. It is hard to work out exactly the drop in prices which is anticipated as a result of the subsidy, but it might fall between 2 and 5 per cent. To assume that firms, on receiving a subsidy of 2 or 3 per cent., will immediately drop their prices by 2 to 5 per cent. is to misunderstand the way in which industry operates. It will, of course, take the money, but to rely on it expanding its output by a few per cent.


as a result of receiving the money is to misunderstand the basic working of the industrial mind.
I am a very strong supporter of increased regional development for economic and social reasons. The balance of payments argument is most dubious and I do not believe that it has been sufficiently proved. We must consider alternative ways of spending £700 million. If this sort of money were used to give the new regional thrusting development which we want, I am sure that it would not have been difficult to produce a more convincing Green Paper than this one and which showed that training could be massively increased by the injection of capital of this sort and that factories could be built, prepared and made ready to accept the industries which would move into them, together with the roads and services.
Our main task is to use labour more productively. Industrial output per man hour in the United States, France, Germany and Italy is higher than it is in this country. We do not use labour very productively in industry, and I do not think that this is a means by which we are likely to move to greater productivity. Although it may be said that we can have our islands of poor labour productivity here and there, it must be remembered that ours is not a large country, and the labour practices of one area are related closely to those of another. Ours is not a large country; distances are not great and the difficulties of regional development should not be so large to us as they might be to others.
The long and expensive method of the regional employment premium involving an expenditure of £100 million per year, year after year, can lead to great dangers. Over this long period, even if it may not be proved conclusively it will be proved to the satisfaction of most that it was either right or wrong. But over the long period of seven years, if we find ourselves committed to something which is proved to be wrong, to have to carry on the commitment year after year could result in the wasteful distribution of public money.
I am very much in favour of bold and unconventional measures. I am inclined to this by temperament and conviction.

I was delighted to see the Green Paper but, when we bring in bold and unconventional measures, it is our responsibility as reformers to make sure not only that an idea is a good one but that it will work out in practice. It is a heavy burden, one we must carry. We must show that the idea will work. I believe that it has not been shown sufficiently that the R.E.P. will work.

8.30 p.m.

Mr. Nigel Birch: The hon. Member for Ashton-under-Lyne (Mr. Sheldon) has made a very distinguished speech. It was well thought out, very well prepared, and I agree with almost all of it.
The objection which I have to the Green Paper policy is that it is an extension of the Selective Employment Tax, which I have always believed to be basically foolish. It is one of the disgusting sequelae of Kaldor. The distinction between service and manufacturing industries was all wrong, the clumsiness and expense of the administration of it was utterly ludicrous, and no attempt has been made to put it right in this Clause.
The real point on which I agree with the hon. Gentleman is this. I may not quote him correctly, but I think that I am singing the same tune. If a lot of these factories are spread round in areas which are not really suitable, in the end they will go bust. If we are trying to build up the economy of the regions and of countries like Wales and Scotland, we have to see that the industrial development goes to places where it will be successful and economic. They need to have the communications, the water and the population.
What we want to do is to try to have growth points. As the hon. Gentleman said, this is a very small country and travelling distances are not so great that we cannot have growth points. What we cannot hope to do successfully is to have a little factory in every village, because if anything goes wrong it will go bust and no one will go there unless the pressure of demand is so great in the main centres that people have to go there to get work at all.
What we want to try is not to spread everything so thin, but to try to concentrate. A number of hon. Members have


outlined the problems of their constituencies. If I might take North Wales as an example, the strip along the North Wales coast has been excluded from the Welsh Development Area. That strip has admirable communications, which central Wales has not. It has water, it has the population, people can get there, people are there, and people come in to work. But it is sandwiched on one side by the Wirral, which is part of the Merseyside Development Area. The Wirral is bursting at the seams and appallingly short of labour. As a result, labour is taken from Wales to the Wirral. On the other side, there are the rural parts of Denbigh, Montgomery and Merioneth, which are unsuitable for industrial development. The result of this measure will be to attract more industry to the Wirral and some industry to the remoter areas where it will not be able to stand up to competition in the long run. It is clear that the proposal has not really been thought out.
While I agree with most of what the hon. Gentleman said, I believe that his bogus Keynesian argument that the £100 million will not cost anything is absolute nonsense. I regret deeply that Lord Keynes died when he did. The general theory in his greatest book dealt with a situation of acute deflation, and it has been much misquoted when people have considered what he would do now. I do not believe that he would have supported this bogus Keynesian argument that we can distribute what the hon. Gentleman rightly described as £700 million. I cannot believe that he would have agreed to it. I am against this proposal. I think that it will be wasteful and damaging to the balance of payments. I think that it will be against the true interests of countries and regions, and certainly against the true interests of Wales.

Mr. Diamond: We have had a very interesting, and by no means short, debate on this Clause which is one of several we are to debate. Many of them deal with interesting and important points, and I know that several hon. Members are waiting to raise them. We have been discussing this Clause since about Four o'clock. I hope, therefore, that it will be thought convenient and appropriate for me to reply to the debate now, particularly as I have heard almost

all the speeches, and during the three-quarters of an hour or so during which I have been out of the Chamber I have had conveyed to me the essential content of those which I did not hear.
All the main arguments have been argued on earlier occasions. They have been repeated today, and many right hon. and hon. Members are anxious to relate them to their constituency problems and geographical areas. I appreciate this, but, nevertheless, I think that we have to concentrate on the general principles of the regional employment premium, and the general principles underlying the Clause. I hope, therefore, that it will be regarded as appropriate, and by no means discourteous, that I should seek now to reply as fully as I can to the many points which have been raised. It will be impossible to reply to them all in any reasonable space of time, but I assure all those who have spoken that I shall carefully consider all the points which have been made—they cover not only this Clause, but related and more general topics—and read with great care all that has been said. If I fail in the course of my reply to deal with any important points which have been raised, I shall write to the hon. Members concerned.
It seems to me that, broadly speaking the Clause has been welcomed. Almost all the speeches from this side of the House have been welcoming ones. The Liberal speeches have been in warm welcome, for which I am grateful. The Opposition have not received it so warmly, and I imagine that they will seek to divide the Committee on it later, but I have heard no compelling arguments against it. Indeed, the argument advanced by the right hon. Member for Flint, West (Mr. Birch) was for concentration. He said that we should not spread this so thinly. This is a valid point and it can be debated whether the geographical area is too wide. Some think that it is not wide enough. Many of the speeches have suggested that the areas should be redrawn. One of the Liberal speeches was to that effect. Many of my hon. Friends have suggested that the areas should be wider still. We know the problem to which the right hon. Member for Flint, West referred. He thinks that it should be narrower.
But whether it should be broader or narrower does not affect the major point


that here is a method by which we seek to do something—and nobody has suggested an alternative—to remove what has clearly come to be an established imbalance between areas—a situation which must be intolerable for those living there and responsible for them. They know that whatever they as managers and working men do to help, the area in which they live, and work, and use every effort to help, is doomed to have less than an average share of the prosperity of the country. This is established beyond doubt, and we must do something to help. Every Government has accepted that we should do something to help, and every Government has helped. We have helped more because naturally we take this point more to heart. All we are saying is that in spite of the help that we have given, and in spite of the best endeavours of everybody concerned—and we have had co-operation from all sides of industry, and from all parties—we have not solved the problem of the difference in the level of activity, and in the level of employment, in different areas. Therefore, we must do something more. This would solve most of the problem which in scale, as my right hon. Friend said, equals the sum of everything done so far.
That is a radical and substantial approach and, if it is right, we should get on with it. If it will achieve a major effect on this imbalance, we should do it as fast as possible. I am, therefore, most grateful for the welcome which it has received from so many hon. Members and for the way in which our publication of these ideas in a Green Paper followed by a Second Reading debate before the introduction of the proposal itself has also been welcomed.
Many hon. Members want the Clause to be more effective. Some think that it goes too wide, but most said that it should be more selective and, more particularly, wider in its effect. Few speeches have suggested that we should not make this attempt. The hon. Member for Worthing (Mr. Higgins) said that he broadly accepted the economic argument that this would introduce more balance in the level of activity between the regions—

Mr. Higgins: The right hon. Gentleman would not wish to misrepresent me,

I know. I said that we accept the aim but do not approve of the method.

Mr. Diamond: Well, that is some common ground. I thought that the hon. Gentleman added that he accepted the general economic argument, but I do not want to put words into his mouth.
That argument is well displayed in paragraph 7 of the White Paper and is the answer to the interesting speech of my hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) that this is not a question of using additional physical resources in a particular way. There is no bar to many of the things which he suggested except the resources available. If this is an alternative, it is not in place of any of his suggestions. If more advance factories were built in development areas, that would not depend on R.E.P. in the slightest. That is a question of policy and resources, but they would be drawn for that purpose and not for the purposes before the Committee—

Mr. Joel Barnett: Would my right hon. Friend not agree, however, that this would apply only if we assumed that the £700 million to be spent is not counted for tax purposes?

Mr. Diamond: No. I do not take that point. I do not know whether my hon. Friend has considered the White Paper's argument. I cannot improve on it, but can perhaps explain it as I see it. That is, by transferring some of the activity in the over-heated areas to the less than sufficiently warm areas, in terms of economic activity, by introducing a more even level of economic activity in all areas, we should then be able to do what we cannot do now, and increase the total level of activity throughout the economy, without reaching the levels imposed by the present imbalance.
We are at the moment prevented from producing sufficient economic activity in Scotland, Wales and Northern Ireland, for example, because, long before every one in those areas can be employed, there is over-employment and over-heating elsewhere. Therefore, we must increase economic activity in the development areas and correspondingly reduce it somewhat in the others in the first stage, followed by raising the level of both. This will be possible as both will be pari passu—

Mr. Noble: Will the right hon. Gentleman bear in mind my point in the debate a few days ago, that, at the moment, engineering work has to be sent from Scotland to the Midlands because there are not enough trained people there to complete their own orders?

Mr. Diamond: I am advised by my hon. Friend the Under-Secretary of State for Economic Affairs, who is sitting with me, that he has no evidence that what the right hon. Gentleman has said is correct—

Mr. Noble: May I give it to him?

Mr. Diamond: We will be only too happy to examine it.
8.45 p.m.
The serious reply to the right hon. Gentleman's point is that we are legislating not for today or for the particular, temporary circumstances of today, but for an imbalance which has been demonstrated over years and has not shown itself adequately susceptible to the treatment and attention of all Governments. No one knows this better than the right hon. Gentleman. That is the situation we face.
We have taken great care to be sure that we are right about the economic theory, and it is generally accepted that this will result in a call not on resources but on the Exchequer. The right hon. Gentleman asked about this and I have done my best to answer. He asked what part of the Exchequer costs would come back. We are not talking about resources now; there is no ultimate call on resources, for the reasons given in the White Paper. More than half would come back in indirect taxes and relief from social service payments. Thus, the net remaining cost on the Exchequer in those terms—this is a broad estimate to help the right hon. Gentleman—would be less than half.

Mr. Higgins: This is vitally important. Is the right hon. Gentleman saying that about half would come back from the collection of the premium as Corporation Tax, or is this the total that he expects? If it is the latter, then this will inevitably increase aggregate demand considerably in the short run, with the inflationary effects which would follow. We should not think only in resource terms; the

monetary terms are also extremely relevant.

Mr. Diamond: So that there will be no confusion, I repeat, in resource terms, that there is no inflationary effect for the reasons carefully spelled out in paragraph 7 of the White Paper.
As to the Exchequer cost—the amount coming back in Corporation Tax and Income Tax—the details for which the hon. Member for Worthing asked, I will give the answer in terms of Corporation Tax, Income Tax, indirect taxes and the relief from social service payments. The net cost to the Exchequer would be less than half, but I cannot measure it more accurately.

Several Hon. Members: rose—

Mr. Diamond: No. I will not give way further.

Mr. McMaster: rose—

Mr. Diamond: I have carefully read the notes handed to me about the speech of the hon. Member for Belfast, East (Mr. McMaster). I congratulate him on it and I appreciate that he supports this proposal. I will not give way because I am sure that he is anxious that we get on with it.

Mr. McMaster: This is an important question.

Mr. Diamond: I hope that the hon. Gentleman will forgive me if I do not give way. I have many questions to answer.
I was asked by the hon. Member for Worthing, in an example of the delivered price of a motor car, what would be the position if motor cars were sold at a given delivered price wherever they were made. He wanted to know what we proposed to do to help in areas which should be helped. The answer is clear: that in a period when there was high production, the factories in those areas would be fully stretched and the work would be going to them. In a period of low production in the motor car industry, those factories would be the last to be laid off or to have their production lines cut. So whichever side of the situation one takes, they would be greatly helped.
The hon. Gentleman then asked how I reconciled the flexibility in the new


Clause—he recognised that there might be circumstances in which this flexibility would be needed and that it was, therefore, right to have these powers—with the statement on page 7 of the White Paper about the seven-year period. The best answer I can give is to read the words in the White Paper. After examining the comments made about the scheme, paragraph 17(VI) states:
… the intention"—
that is, the intention of the Government—
is that payments of this magnitude in respect of manufacturing employment in Development Areas should continue to be given until their purpose has been achieved—and in any case for not less than seven years in the existing Development Areas".
I repeat those words and I confirm them. This is the flexibility which we need and imagine we might need if, for example, additional development areas are scheduled later or if variations in the rates should be made to meet changing circumstances in those new areas. The flexibility which we need and which is incorporated in the Clause is not intended to be used in any sense against the intention which I have reread and which I repeat. I recognise—and this is something which has been clearly brought to our attention by the publication of the Green Paper and the value of the debates since then and the representations which have been made—that if investment is to be attracted into these areas, it must be on a fairly permanent basis and certainly of the kind described in the paragraph I have read.

Mr. Maxwell-Hyslop: Why do the Government call this a regional employment premium when it has nothing to do with the regions but only with the development areas? Is this intended to deceive the public into thinking that this premium will be paid in individual regions, rather than only in development areas?

Mr. Diamond: That is a valuable contribution, I must say. The answer is "No". The Government have not done anything to deceive anybody and would not even seek to deceive the hon. Gentleman. He is much too bright.
The spokesman for the Liberal Party, the hon. Member for Roxburgh, Selkirk and Peebles (Mr. David Steel), welcomed our proposal. I am glad of that welcome

and I reciprocate by welcoming his proposal, which was that there should be a tax on Toryism. Every Treasury Minister is anxious to find new sources of revenue and I assure the hon. Gentleman that I will examine this one most carefully. He asked whether the flexibility in the Clause made it possible to vary the rates as between the sexes. The answer is "Yes", as my right hon. Friend explained when moving the Clause.
I come to the two major criticisms which have been made—one about the side effects, as it were, of this proposal, and the other about its inadequacy in the sense that it should go further, especially in relation to service industries. The aspect of side effects was expanded in a most interesting and valuable speech by my hon. Friend the Member for Lancaster (Mr. Henig). He welcomed the proposals in general and said that they were—I quote his words—"a massive overwhelming inducement to go to development areas". I hope that they are. I hope that hon. Members on all sides accept them as a massive, overwhelming inducement.
My hon. Friend was, however, anxious about the effect on what have come to be called the grey areas, the not-so-dynamic areas, and wanted reassurance about that possible situation. I should like to make it quite clear to him that these proposals are additional to the present methods of assisting in these areas. One of these methods is, as he knows, the I.D.C. method. There is considerable flexibility about the granting of I.D.C.s and nothing in these proposals removes that flexibility.
The first answer, therefore, is that my right hon. Friend the President of the Board of Trade, in considering a particular application for an I.D.C., in an area that has become in need of the additional factories and employment that I.D.C.s give, as a result of changed circumstances—perhaps dependent, to some extent, on these very R.E.P. proposals—would take into account these new and developing circumstances, and there is nothing in these proposals to limit the flexibility that my right hon. Friend already enjoys in that respect.

Mr. Barnett: Is my right hon. Friend aware that when a company from the South-East wanted to move into my constituency and asked for an I.D.C., it


was eventually encouraged not to come into Lancashire but to go into a development area? Therefore, the I.D.C. is not used to help the grey areas, as they are called.

Mr. Diamond: I am interested in what my hon. Friend says—and I have no doubt that he has made his representations to my right hon. Friend the President of the Board of Trade—but there is nothing that he has said which is in the slightest degree inconsistent with what I say. What he says is that today, already, before we have these proposals and these regional employment premiums, the President of the Board of Trade is using his discretion so as to direct factories to the areas where they are most needed. I have not examined the case, but I have the greatest confidence in my right hon. Friend, and the principle is one that I should have thought would have found unanimous support.
All I say to my hon. Friend the Member for Lancaster is that if the circumstances about which he is worried—and, I think, unnecessarily worried—in regard to a certain part of his constituency were to mature, my right hon. Friend would continue to use his discretion in order to help where the help was most needed, and the grey area to which my hon. Friend refers would have succeeded to that position and would be a priority area.
That is the first answer. The second is that, as my right hon. Friend said in asking the House to give the Clause a Second Reading, this is a new situation which we recognise needs very careful examination. He indicated the kind of examination it will receive and explained that he had asked Sir Joseph Hunt, who has already done excellent work in this field as Chairman of the Economic Planning Council, West Midlands, to do this. Sir Joseph, who is now in London and available to take on a job like this, has agreed to do it. I cannot give the House the terms of reference—they have not yet been agreed—or the further details—an hon. Friend asked when the report would be out—but, as I say, this is a matter that requires the most careful and urgent examination, and that it will receive.
9.0 p.m.
In those circumstances, my hon. Friend the Member for Lancaster need not have

anxieties, especially if he will go with me on the economic theory, which is that what is happening is a two-stage exercise—first, to get the levels nearer to one another by increasing economic activity in the development areas and to a certain extent decreasing it in the overheated areas; and, secondly, having got the levels more attuned, to increase activity all over, which one is debarred from doing at present, because to get to the point where the hon. Member for Belfast, East is satisfied because his 9 per cent. unemployment rate has been reduced to 1 per cent., means that other areas are hopelessly over-employed and we have inflation.

Mr. Henig: My right hon. Friend has gone some way towards relieving my anxieties and the anxieties of others, but I wonder whether I can press him a little further. If the industrial development certificate policy were to fail in the short and medium-term circumstances and these inducements to move to development areas failed to keep unemployment in my constituency and others in Lancashire at a level which could be considered reasonable, which is lower than that which we have had in the development areas, could the Government pledge that they would act to restore the situation by some means? If he can give that pledge, I shall be satisfied.

Mr. Diamond: My hon. Friend is underlining the point which he made earlier and which I took when he made it. Certainly I can give the assurance that if circumstances were such that in this area, which is not a development area at the moment, economic activity became less than that of a development area, it would of course be eligible to be scheduled as a development area and get the help which goes to development areas. But, as I have indicated already, we do not expect that to happen, because of the way in which these proposals will work out. I hope that I have satisfied my hon. Friend and others with similar anxieties that this proposal will have nothing but beneficial effects in the long run and will not put a strain on our resources, or exacerbate the balance of payments problem.
A number of hon. Members have referred to the service industries and have even gone so far as to suggest that a premium should be paid to all service industries in development areas. The


position of service industries, however, is very different. It will be appreciated that one of the essential elements in the argument so far is the balancing effect of increasing competitiveness in development areas and, therefore, to some extent, the reducing of the competitiveness of other areas. This is the effect in manufacturing when there is competition, but it is not an effect, with rare exceptions, in the service industries, because service industries in one area are not in competition with service industries in others in the same way that manufacturing industries are.

Mr. Maxwell-Hyslop: Nonsense.

Mr. Diamond: Most of what the hon. Gentleman says is nonsense. I have rarely heard him make a speech—and I have listened to far too many—which is not accurately described by that one word, and I have rarely seen him get up to make an interruption.
The essential difference is that there is not this competition and, therefore, we do not have to safeguard against the inflationary effect which is built into competition in manufacturing. There would not be an increase in activity in one area which to some extent would be matched by a reduction of activity in another. Therefore, one would not have the freedom from inflation which one derives from the competition of manufacturing industries.

Mr. Robert Cooke: In attacking my hon. Friend the Member for Tiverton (Mr. Maxwell-Hyslop), the right hon. Gentleman was, I think, neglecting the position of the hotel and tourist trade. Surely, there is a considerable element of competition there.

Mr. Diamond: I am sorry that the hon. Gentleman is so impatient. Tourism was the item to which I was about to come. I was explaining why we cannot deal with the service industries in the way wanted by some of my hon. Friends, though I repeat that, to the extent that there are areas where there is need for further help, the examination to which my right hon. Friend referred will, no doubt, indicate methods of giving that further help.
The one service industry in which there is competition is the tourist industry and I cannot, therefore, rely on that argument

for not helping it. The Government are already helping the tourist industry in a number of ways. There is the help given by building grants for hotels under the Local Employment Act. There is the Board of Trades hotel loan scheme. The British Travel Association spends a good deal of public money on promoting activity in this field. There are several agricultural subsidies which are of particular help in tourist areas, and in Scotland a great deal is being done through the Highlands and Islands Development Board.
I recognise the need to help tourism, and I acknowledge the importance which tourism has, although it is often exaggerated, in terms of the balance of payments. Broadly, we reckon that about one-tenth of its receipts are receipts across the exchanges. I assure the House that we are very conscious of the problems of the tourist areas, and we shall take account of what has been said in this debate and elsewhere in reviewing the possibility of additional assistance.
I have answered the major points which were put to me, Sir Eric—

Mr. Maxwell-Hyslop: Nonsense.

Mr. Diamond: I do not know whether that remark was addressed to you, Sir Eric, or to me. I have answered the detailed questions which were put to me, many of them of great importance. I have tried to deal with the major anxieties which certain of my hon. Friends and others have expressed both as to the scheme not going far enough in certain respects and as to its going too far in others. In broad outline, I would say that the scheme has been given a warm welcome in most quarters. There have been questions about its administration. There has been no official Amendment put down to suggest an alternative way of achieving the objectives, which the official Opposition say they approve.

Mr. Iain Macleod: For the sake of clarification, may I say that we decided that it would be for the convenience of the Committee not to have an Amendment down so that we could, in effect, have a wide-ranging Second Reading debate. This does not mean that we do not intend to put down Amendments at the appropriate stage.

Mr. Diamond: I am glad that I mentioned the point, as it has given the right hon. Gentleman an opportunity to explain something which might otherwise have been misunderstood. Broadly, judging by the speeches, one can say that this proposal has received a sufficient welcome, and I am sure that, if the matter is divided upon, we can rely on the support of most sections of the Committee.

Mr. Michael Noble: The Chief Secretary and I have listened to about 90 per cent. of the debate. It is clear from his statement that the proposal has had a general welcome that the 10 per cent. when the right hon. Gentle. man was out of the Chamber covered those occasions when hon. Members both on his side and on ours said that, though they welcomed the general principle—it is difficult not to welcome a general principle which gives a large sum of money to the development areas—they had various reasons for saying that the scheme as propounded in the Green Paper, in what has been said by the Chancellor and by others and in the Clause does not meet the particular problems which they foresee either in their own parts of the country or in the United Kingdom as a whole. Therefore I do not think that the general welcome to which the right hon. Gentleman refers can mean much more than that each Member who spoke paid at least some lip service to the fact that the Government were spending £100 million on an object which is dear to the hearts of every hon. Member, wherever he or she may sit.
But the Chief Secretary made it absolutely clear in answering the point made by my hon. Friend the Member for Worthing (Mr. Higgins) that, whatever the Chancellor's intent was, the scheme as he has devised it is reflationary to the extent of at least £50 million in the first year or so. We are told in the Green Paper that this is not a contra-cyclical measure, but that is clearly the result of the answer that the Chief Secretary gave to my hon. Friend's point.
I accept that it is very important that we should have flexibility in thinking about how we are to use the powers which the Government have taken, and I am delighted that the Chancellor has

said that he has taken the powers in order to be able to vary the amounts and the regions and areas, because this may well be necessary. But the point that the Chief Secretary did not make convincingly enough for me, though it may be the case, is that a firm getting the full premium at the moment will be entitled to believe—if it is to believe in the measure at all—that it will get the full premium for seven years and that after that it may taper off. The Chancellor says that the power is there to vary the the amount of premium, but I take it from the fact that the Chief Secretary is nodding his head that once a firm has established its right to the full premium it will not be the Government's intention in three or four years' time to vary that amount downwards.

Mr. Diamond: I very carefully read out the paragraph in the White Paper which spelled out completely the answer to the right hon. Gentleman's point.

Mr. Noble: In fact the Chief Secretary is saying that I am right—or he is saying the White Paper is right, which may be slightly different from what I am saying. But my point is that, once a firm has the offer of the premium, if it is to retain confidence it must know that it continues for the full seven years.
The other point on which I was not quite clear, even after the Chief Secretary read out the appropriate section, is, if an area is changed, if the "grey" areas to which many hon. Members referred are brought in, whether they will have a seven-year yeriod from the time when they are brought in. If other areas are left, does a firm getting the premium in the area which is removed continue to get it for seven years? I take it that that is so.

Mr. Diamond: I thought that my right hon. Friend had already indicated that de-scheduling would not affect the issue. In a totally new area it is not a question of seven years from that area becoming a development area but seven years from the date in the Act, as indicated in the White Paper.

Mr. Noble: I am grateful to the Chief Secretary for clearing up that point. I thought that that was so, but I was not absolutely certain by the time he finished his speech.
I find it a little difficult to be quite clear on the whole problem of wages. In his opening speech the Chancellor said that this was a very important subsidy; it was 7½ per cent. on the cost of wages. I accept that as the fact. The hon. Member for Roxburgh, Selkirk and Peebles (Mr. David Steel) who welcomed the Bill, as the Chief Secretary said, did so because he wanted the money to go direct on to wage rates in the development areas. If that is the welcome which the Chief Secretary wants, it would entirely ruin the whole purpose of the operation. But many hon. Members opposite, when talking about the wage problem, said that this was a very small thing, that it was only a tiny amount. I hope that they and the Chancellor will make up their minds between them as to whether 7½ per cent. on wages is a significant addition to costs or not.
9.15 p.m.
The hon. Member for Manchester, Wythenshawe (Mr. Alfred Morris), in an interesting speech, welcomed the principle of the Clause but on the whole was highly critical of the sort of effects it will have on the grey areas. I have some sympathy with that point of view, not because Scotland has grey areas—it is almost entirely, with the rather lamentable exception of Edinburgh and Leith in a development area—but because there is a real problem involved here. I am glad the Secretary of State for Scotland is here to listen to the debate. We believe that we shall have exactly the same sort of problems inside Scotland as the hon. Member for Wythenshawe and many of his hon. Friends fear will occur in the grey areas.
I was interested to hear the speech of the hon. Member for Aberdeen, South (Mr. Dewar)—I am sorry I missed the first few minutes—because he said that we in Scotland had to think nationally and not locally. I agree. But he was not in the House during the years when I was steadily attacked by his right hon. and hon. Friends for producing a plan for central Scotland. I was told that this was a wicked thing to do because I was neglecting the north-east of Scotland, the Borders, the Highlands and the other areas. But it was clear at that stage that the key to the development of Scotland lay in the development of the central belt

of Scotland. We spent an enormous amount of Government money on doing just that.
Now, following the spending of so much money on the development of the central belt, the Government are bringing in an extra £40 million for Scotland. This is an important addition to the measures that can help, but the money is going almost entirely to the central belt again and I fear, as do the hon. Members from the north-west of England, that the pull of this extra premium in the central belt will have a serious effect in denuding areas that we should be trying to build up. Having spent a good deal of money on the central belt, we are now having a large dose of extra money almost entirely going into that area again. I have sympathy with those who feel that there is likely to be a distinct pull away from areas close to a development area which have not got the necessary attractions to compete with that pull.
I do not think that the Chief Secretary was being as clear in his thinking as he sometimes is when he said that nearly all the service industries do not have the same spur of competition if they are to get established in the development areas, that they do not have the competition with other areas outside. He excepted, on an interruption, tourism and, of course, this is true. But there is also the very large service industry of distribution, which is fully competitive, I would have thought, whether based in Scotland or other places. Long-range lorries convey a great quantity of goods from one end of the country to the other. A great deal of the construction industry is certainly competitive, with English firms operating in Scotland and Scottish firms—to a lesser extent, I am sorry to say—operating down here.
The points which the right hon. Gentleman did not attempt to touch upon were some of those raised by my hon. Friend the Member for Barkston Ash (Mr. Alison), who made the valid point that there is no part in this scheme—and I accept that it could not cover the whole range of economic affairs—to help exports. The same point was made by the hon. Member for Penistone (Mr. Mendelson), who was also critical of it in the general economic context.

Mr. Mendelson: I made no reference to exports in particular. I supported the


measure, but I said that it must not be taken as a substitute for the general policy of increasing consumer demand and thereby increasing investment.

Mr. Noble: I apologise to the hon. Gentleman. I thought he was on exports. One of his hon. Friends was on exports and, though I have a lot of notes, it is sometimes difficult to sort out who said what.
I had some sympathy with the hon. Gentleman the Member for Roxburgh, Selkirk and Peebles when he talked about the possibility—which I hope the Chancellor may be able to consider at some stage—of varying the incentives to suit the particular areas or parts of a region. He said that the problem in the Border area is a grave shortage of male employment and if it was possible within an area of that sort to pay a higher premium for male employment and a lower one for females, he, unlike most Liberals, accepted that one could go both ways. This might be an advantage and he welcomed it. I thought he indicated that it was a poor thing, but it was good enough for the Liberals.
I felt that this was the attitude that my hon. Friend the Member for Belfast, East (Mr. McMaster) took when he said that £11 million was not something to be scoffed at. This is true, but it is interesting that industrialists turned down £100 million on the ground that they did not think it was being used in the right way. If the people who are to get benefits of that sort are prepared to turn them down because they think it is wrong, then I think my hon. Friend might well at least ponder in his mind whether he is right in the long term to accept it without question. The C.B.I. and others must not complain if the Government, having consulted them, turns down flat their recommendations, because this does not put them in any worse position than Privy Councillors today.
The hon. Gentleman the Member for Cardigan (Mr. Elystan Morgan) spoke for many of us who live in rural areas, because whether this will be the bold, imaginative, wonderful thing that the Chancellor believes it will be for the main industrial areas in the development areas, which many of us doubt, it is certainly true that there is practically nothing in it for the rural areas either in Wales, the South-West, the Highlands and other

places. Though the Chancellor has said that he has taken all these powers by which he can vary things to help, the truth is that it is almost essential in these areas pretty soon, if I may put it in that form, not just to have taken powers, but actually to be seen to be using powers to help either some of the service industries or in some way to indicate to the people there that they have a future. Once this extra 30s. premium goes on into the industrial areas the drain from the country to the town will accelerate quite fast unless the Government have their plans ready and can tell us what they are.
The whole picture of the debate, as I have listened to it, falls simply into two distinct halves. There are those hon. Members who live in development areas, or whose constituencies are in development areas, and who have welcomed the idea of having extra money, but without exception those hon. Members representing largely rural constituencies have said that this proposal will do nothing to help their areas.

Mr. Jasper More: There is a third category, which is a constituency like mine which has a new town which we are trying to start and which is most adversely affected by anything in the nature of these proposals.

Mr. Noble: I am certain that that is so, but in broad principle the debate has been divided between those representing rural areas, where there is still continuing concern about how the problems of tourism and the service industries are to be met, and those hon. Members who have broadly accepted that a wage subsidy is a good thing—I do not say that it is only because it may find its way into the pockets of those concerned.
Those hon. Members who have considered the matter in relation to the Government's whole economic policy have failed to say a single word of commendation for this form of measure. Several hon. Members, including the hon. Member for Plymouth, Sutton (Dr. David Owen), the hon. Member for Penistone and many of my hon. Friends, have said that the priority in the present economic situation is investment, and yet not one Government spokesman has seriously suggested that any sizeable amount of this £100 million can possibly get back into investment.

Mr. McMaster: Does not my right hon. Friend realise that the Chief Secretary has admitted that more than 50 per cent. will come back to the Government, which means it must be going on wages or profits and none to investment or reducing prices or costs?

Mr. Noble: My hon. Friend is almost certainly right. He is perking up a little. At least the Chief Secretary did not attempt to persuade the Committee that there was anything for investment in this proposal. Although the Chancellor says that he will be considering ways and means of improving training techniques and methods and he may have some ideas to pull out of the hat in due course—we remember that he has shots in his locker—there is nothing in this proposal to help with the two key problems identified by almost every hon. Member who took part in the debate—training and investment, which were identified by the Scottish Council as the two top priorities. Although the hon. Member for Aberdeen, South tried to get away with saying that the Scottish Council had given the proposal a blanket welcome, if he reads its report, he will find that it did not.

Mr. Archie Manuel: It wanted the money.

Mr. Noble: Of course it wanted the money, and so does the hon. Member for Central Ayrshire (Mr. Manuel), but there is a great deal of difference between the sort of panic which the Government are in having to get some money into the development areas quickly, in the belief that there will be a considerable economic freeze next winter, whether the weather is warm or not, and seriously considering how best to use £100 million of the taxpayers' money to do the right things for industry in the development areas in the long run.
The Government have rushed this decision and have made this decision because they have talked themselves into believing that this money will come out of thin air in some curious way. My right hon. Friend the Member for Flint, West (Mr. Birch) showed what nonsense that was. But the Government feel that something must be done, and this £100 million proposal is certainly not something which the Committee and the trade unions will throw out. One cannot see hon. Members opposite passing up a large

sum of money for the development areas, but it has been wrongly thought out, and our long-term aims will not be achieved by this proposal, and because of that I ask my hon. and right hon. Friends to vote against the proposal when the time comes to have a Division.
There are much better ways, and there were many alternatives suggested which the Chief Secretary did not even acknowledge. It may have been bad luck, and he may have been out of the Committee at the particular time, but I am certain that some alternatives will be put forward on Report. My right hon. Friend the Member for Mitcham (Mr. R. Carr) produced several alternatives in his last speech, and at least four have been mentioned while I have been in the Committee.

9.30 p.m.

Mr. Maxwell-Hyslop: This measure is bad, and the Ministers who advocate it foolish, primarily for three reasons, none of which have been demolished by the speech, if I may dignify it with that expression, of the Chief Secretary. It is bad because it increases the distortions between the manufacturing sections of the economy and the other sections. It increases those distortions in a series of areas which there is already economic distortion. A development area is an area already suffering economic distortion. Secondly, it is bad because it increases the distortion between development areas and areas which are not development areas.
Many hon. Members on both sides of the Committee have pointed out the difficulties which this measure will create for areas contiguous to development areas, which are in every way similar, but which happen to be outside of the employment exchange district, which is the defining criterion. Those distortions are increased. Third and greatest of all condemnations, it is bad because it does not deal with the causes of why a development area is a development area.

Lieut.-Colonel Sir Walter Bromley-Davenport: I must ask my hon. Friend not to use such long words, because the hideous animal lobby fodder cannot understand them.

Mr. Maxwell-Hyslop: I have no doubt that the sheer impact of them will not be lost on my hon. and gallant Friend,


even if the understanding of them is. The primary cause of most development areas suffering economic misfortune is either because they are remote from main centres of population and demand, or because they have other major geographical disadvantages.
If only £100 million, let alone £700 million, was spent on communications between the development areas and the centres of demand the whole of the development area would benefit, whether the manufacturing part, the service part or the trading part.

Mr. Mendelson: If the hon. Gentleman is so interested in this subject, why did he remain out of the Chamber for 90 per cent. of the time and come in now to give us a lecture?

Mr. Maxwell-Hyslop: I listened to the hon. Gentleman's speech with great interest. I can only assume that the arithmetic which went into his speech was more accurate than the arithmetic which went into that comment. I was observing that if the Government wanted

to tackle this problem there was no more effective way in which they could do it than by improving the communications, particularly by road, from the development areas to the centres of demand and of the export trade and by cutting out altogether the artificial distortions between one area and another which mean that some parts of the community are more distressed than others and forgetting for all time their apparent determination to increase the distortions which, when the umbrella is closed, as sooner or later it will be, will only leave those areas worse off than they were.

Mr. William Whitlock (Lord Commissioner of the Treasury): rose in his place and claimed to move, That the Question be now put.

Question, That the Question be now put, put and agreed to.

Question put accordingly, That the Clause be read a Second time:—

The Committee divided: Ayes 217, Noes 129.

Division No. 365.]
AYES
[9.37 p.m.


Allaun, Frank (Salford, E.)
Davies, Ifor (Gower)
Hannan, William


Allen, Scholefield
de Freitas, Rt. Hn. Sir Geoffrey
Harper, Joseph


Anderson, Donald
Delargy, Hugh
Harrison, Walter (Wakefield)


Archer, Peter
Dempsey, James
Haseldine, Norman


Armstrong, Ernest
Dewar, Donald
Hattersley, Roy


Atkins, Ronald (Preston, N.)
Diamond, Rt. Hn. John
Hazell, Bert


Atkinson, Norman (Tottenham)
Dobson, Ray
Henig, Stanley


Bacon, Rt. Hn. Alice
Doig, Peter
Hooley, Frank


Bagier, Gordon A. T.
Donnelly, Desmond
Hooson, Emlyn


Baxter, William
Dunn, James A.
Horner, John


Beaney, Alan
Dunnett, Jack
Houghton, Rt. Hn. Douglas


Bennett, James (G'gow, Bridgeton)
Dunwoody, Dr. John (F'th &amp; C'b'e)
Howarth, Harry (Wellingborough)


Bessell, Peter
Edwards, Rt. Hn. Ness (Caerphilly)
Howarth, Robert (Bolton, E.)


Binns, John
Ellis, John
Howell, Denis (Small Heath)


Bishop, E. S.
English, Michael
Howie, W.


Blackburn, P.
Ensor, David
Hoy, James


Booth, Albert
Evans, Albert (Islington, S.W.)
Huckfield, L.


Bottomley, Rt. Hn. Arthur
Evans, Ioan L. (Birm'h'm, Yardley)
Hughes, Rt. Hn. Cledwyn (Anglesey)


Boyden, James
Faulds, Andrew
Hughes, Roy (Newport)


Braddock, Mrs. E. M.
Fernyhough, E.
Hynd, John


Bray, Dr. Jeremy
Fletcher, Raymond (Ilkeston)
Irvine, A. J. (Edge Hill)


Brooks, Edwin
Fletcher, Ted (Darlington)
Jackson, Colin (B'h'se &amp; Spenb'gh)


Brown, Hugh D. (G'gow, Provan)
Foot, Michael (Ebbw Vale)
Jackson, Peter M. (High Peak)


Brown, Bob (N'c'tle-upon-Tyne, W.)
Ford, Ben
Janner, Sir Barnett


Buchan, Norman
Forrester, John
Jenkins, Rt. Hn. Roy (Stechford)


Butler, Herbert (Hackney, C.)
Fowler, Gerry
Johnson, James (K'ston-on-Hull W.)


Callagnan, Rt. Hn. James
Fraser, Rt. Hn. Tom (Hamilton)
Johnston, Russell (Inverness)


Cant, R. B.
Galpern, Sir Myer
Jones, Dan (Burnley)


Carmichael, Neil
Gardner, Tony
Jones, J. Idwal (Wrexham)


Coe, Denis
Ginsburg, David
Jones, T. Alec (Rhondda, West)


Coleman, Donald
Gordon Walker, Rt. Hn. P. C.
Kelley, Richard


Conlan, Bernard
Gourlay, Harry
Kerr, Dr. David (W'worth, Central)


Craddock, George (Bradford, S.)
Gray, Dr. Hugh (Yarmouth)
Leadbitter, Ted


Crawshaw, Richard
Greenwood, Rt. Hn. Anthony
Ledger, Ron


Crosland, Rt. Hn. Anthony
Gregory, Arnold
Lee, John (Reading)


Cullen, Mrs. Alice
Grey, Charles (Durham)
Lever, L. M. (Ardwick)


Dalyell, Tam
Griffiths, David (Rother Valley)
Lewis, Arthur (W. Ham, N.)


Davidson, Arthur (Accrington)
Griffiths, Rt. Hn. James (Llanelly)
Lewis, Ron (Carlisle)


Davidson, James (Aberdeenshire, W.)
Grimond, Rt. Hn. J.
Lomas, Kenneth


Davies, Dr. Ernest (Stretford)
Hamilton, James (Bothwell)
Lubbock, Eric


Davies, G. Elfed (Rhondda, E.)
Hamilton, William (Fife, W.)
Lyon, Alexander W. (York)


Davies, Ednyfed Hudson (Conway)
Hamling, William
Lyons, Edward (Bradford, E.)




MeBride, Neil
Page, Derek (King's Lynn)
Thomas, George (Cardiff, W.)


MacDermot, Niall
Palmer, Arthur
Thornton, Ernest


Macdonald, A. H.
Pannell, Rt. Hn. Charles
Thorpe, Rt. Hn. Jeremy


McGuire, Michael
Barkyn, Brian (Bedford)
Tinn, James


Mackenzie, Alasdair (Ross &amp; Cromarty)
Pavitt, Laurence
Tomney, Frank


Mackenzie, Gregor (Rutherglen)
Pearson, Arthur (Pontypridd)
Urwin, T. W.


Mackintosh, John p.
Peart, Rt. Hn. Fred



Maclennan, Robert
Pentland, Norman
Varley, Eric G.


McNamara, J. Kevin
Prentice, Rt. Hn. R. E.
Wainwright, Edwin (Dearne Valley)


MacPherson, Malcolm
Price, William (Rugby)
Wainwright, Richard (Colne Valley)


Mahon, Peter (Preston, S.)
Probert, Arthur
Walden, Brian (All Saints)


Mahon, Simon (Bootle)
Randall, Harry
Wallace, George


Mallalieu, E. L. (Brigg)
Rees, Merlyn
Watkins, David (Consett)


Manuel, Archie
Rhodes, Geoffrey
Watkins, Tudor (Brecon &amp; Radnor)


Mapp, Charles
Roberts, Goronwy (Caernarvon)
Wellbeloved, James


Maxwell, Robert
Robinson, W. O. J. (Walth'stow, E.)
Wells, William (Walsall, N.)


Mendelson, J. J.
Rogers, George (Kensington, N.)
Whitaker, Ben


Millan, Bruce
Rose, Paul
Whitlock, William


Miller, Dr. M. S.
Ross, Rt. Hn. William
Williams, Alan (Swansea, W.)


Morgan, Elystan (Cardiganshire)
Rowland, Christopher (Meriden)
William, Clifford (Abertillery)


Morris, Alfred (Wythenshawe)
Rowlands, E. (Cardiff, N.)
Williams, Mrs. Shirley (Hitchin)


Morris, Charles R. (Openshaw)
Shore, Peter (Stepney)
Wilson, William (Coventry, S.)


Moyle, Richard
Short, Rt. Hn. Edward (N'c'tle-u-Tyne)
Winnick, David


Newens, Stan
Silverman, Julius (Aston)
Winstanley, Dr. M. P.


Oakes, Gordon

Winterbottom, R. E.


Ogden, Eric
Silverman, Sydney (Nelson)
Woodburn, Rt. Hn. A.


O'Malley, Brian
Slater, Joseph
Woof, Robert


Orbach, Maurice
Small, William
Wyatt, Woodrow


Orme, Stanley
Spriggs, Leslie
Yates, Victor


Oswald, Thomas
Steel, David (Roxburgh)



Owen, Dr. David (Plymouth, S'tn)
Steele, Thomas (Dunbartonshire, W.)
TELLERS FOR THE AYES:


Owen, Will (Morpeth)
Stonehouse, John
Mr. Harold Walker and




Mr, John McCann.




NOES


Alison, Michael (Barkston Ash)
Fortescue, Tim
Nabarro, Sir Gerald


Astor, John
Foster, Sir John
Nicholls, Sir Harmar


Atkins, Humphrey (M't'n &amp; M'd'n)
Gilmour, Ian (Norfolk, C.)
Noble, Rt. Hn. Michael


Awdry, Daniel
Gilmour, Sir John (Fife, E.)
Osborn, John (Hallam)


Barber, Rt. Hn. Anthony
Glover, Sir Douglas
Osborne, Sir Cyril (Louth)


Beamish, Col. Sir Tufton
Gower, Raymond
Page, Graham (Crosby)


Bell, Ronald
Grant, Anthony
Pearson, Sir Frank (Clitheroe)


Bennett, Sir Frederic (Torquay)
Grant-Ferris, R.
Pike, Miss Mervyn


Berry, Hn. Anthony
Gresham Cooke, R.
Pink, R. Bonner


Birch, Rt. Hn. Nigel
Grieve, Percy
Powell, Rt. Hn. J. Enoch


Black, Sir Cyril
Gurden, Harold
Prior, J. M. L.


Blaker, Peter
Hall, John (Wycombe)
Pym, Francis


Body, Richard
Hamilton, Michael (Salisbury)
Ramsden, Rt. Hn. James


Bossom, Sir Clive
Harrison, Col. Sir Harwood (Eye)
Rawlinson, Rt. Hn. Sir Peter


Boyd-Carpenter, Rt. Hn. John
Hawkins, Paul
Renton, Rt. Hn. Sir David


Boyle, Rt. Hn. Sir Edward
Heseltine, Michael
Royle, Anthony


Braine, Bernard
Higgins, Terence L.
Russell, Sir Ronald


Brinton, Sir Tatton
Hiley, Joseph
Shaw, Michael (Sc'b'gh &amp; Whitby)


Bromley-Davenport, Lt. Col. Sir Walter
Hirst, Geoffrey
Smith, John


Brown, Sir Edward (Bath)
Hobson, Rt. Hn. Sir John
Stainton, Keith


Bryan, Paul
Hogg, Rt. Hn. Quintin
Stoddart-Scott, Col. Sir M. (Ripon)


Buchanan-Smith, Alick (Angus,N &amp; M)
Holland, Philip
Summers, Sir Spencer


Buck, Antony (Colchester)
Hunt, John
Taylor, Edward M. (G'gow, Cathcart)




Taylor, Frank (Moss Side)


Bullus, Sir Eric
Hutchison, Michael Clark
Temple, John M.


Burden, F. A.
Jenkin, Patrick (Woodford)
Thatcher, Mrs. Margaret


Carlisle, Mark
Jopling, Michael
Tilney, John


Carr, Rt. Hn. Robert
Kaberry, Sir Donald
Turton, Rt. Hn. R. H.


Clegg, Walter
Kimball, Marcus
van Straubenzee, W. R.


Cooke, Robert
King, Evelyn (Dorset, S.)
Vaughan-Morgan, Rt. Hn. Sir John


Cordle, John
Lancaster, Col. C. G.
Weatherill, Bernard


Corfield, F. V.
Lewis, Kenneth (Rutland)
Webster, David


Costain, A. P.
Lloyd, Ian (P'tsm'th, Langstone)
Whitelaw, Rt. Hn. William


Craddock, Sir Beresford (Spelthorne)
McAdden, Sir Stephen
Wills, Sir Gerald (Bridgwater)


Crowder, F. P.
Maclean, Sir Fitzroy
Wilson, Geoffrey (Truro)


Dance, James
Macleod, Rt. Hn. Iain
Wolrige-Gordon, Patrick


Dean, Paul (Somerset, N.)
Macmillan, Maurice (Farnham)
Wood, Rt. Hn. Richard


Deedes, Rt. Hn. W. F. (Ashford)
Maude, Angus
Woodnutt, Mark


Eden, Sir John
Maxwell-Hyslop, R. J.
Worsley, Marcus


Elliott, R. W (N 'c'tle-upon-Tyne, N.)
Maydon, Lt.-Cmdr. S. L. C.
Wright, Esmond


Emery, Peter
Miscampbell, Norman
Wylie, N. R.


Errington, Sir Eric
Monro, Hector



Eyre, Reginald
Morgan, Geraint (Denbigh)
TELLERS FOR THE NOES:


Farr, John
Morrison, Charles (Devizes)
Mr. Jasper More and


Fletcher-Cooke, Charles
Murton, Oscar
Mr. Timothy Kitson.

Clause added to the Bill.

New Clause No. 68.—(LLOYD'S AND OTHER UNDERWRITERS.)

(1) Arrangements under Schedule 21 to the Income Tax Act 1952 (special reserve funds for underwriters) may authorise the making of payments pursuant to paragraph 7(1) of that Schedule (withdrawals from special reserve funds into premiums trust fund to meet a loss) on a provisional basis before the amount of the loss has been finally ascertained and certified by the inspector.

(2) The amount so withdrawn shall not exceed such proportion of the estimated loss as may be specified in the arrangements.

(3) When the amount of the loss has been certified by the inspector such adjustments shall he made by repayment to the underwriter's special reserve fund or funds, or by further withdrawal of sums for payment into the underwriter's premiums trust fund, as will secure that the net amount withdrawn from the underwriter's special reserve fund or funds in respect of the loss is that required pursuant to paragraph 7(1) of the said Schedule 21; and no tax consequences shall ensue on the withdrawal of sums in respect of a loss until the amount of the loss has been so certified and any such adjustments have been made.

(4) This section shall be construed as one with the said Schedule 21.—[Mr. MacDermot.]

Brought up, and read the First time.

9.45 p.m.

The Financial Secretary to the Treasury (Mr. Niall MacDermot): I beg to move, That the Clause be read a Second time.
This Clause will enable Lloyd's underwriters to make withdrawals from their reserve fund by reference to provisional losses in advance of the final certification of the losses for tax purposes. The present scheme, which was introduced by Sir Stafford Cripps in 1949, has, on the whole, worked well, but it turns out that these arrangements cannot be operated quickly enough in the exceptional case where underwriters face very heavy losses of the kind that arose following Hurricane Betsy.
The Clause will enable them in such circumstances to make withdrawals on a provisional basis. It will not make any difference in the end to the tax position. The tax consequence will follow as at present on final certification of the loss, after the year's account has been closed two years after its end.

Mr. Iain Macleod: The Clause is entirely acceptable to us, and we are grateful to the hon. and learned Gentleman for his explanation.

Question put and agreed to.

Clause read a Second time, and added to the Bill.

New Clause No. 2.—(OWN AS YOU EARN.)

(1) Where, in accordance with the provisions of this section, a special banking account (hereinafter referred to as an 'Employee's Savings Account') is opened on behalf of an individual, he shall be entitled to such relief from income tax as is provided in this section.

(2) An Employee's Savings Account shall be an account deposited with a joint-stock bank or with a trustee savings bank or such other institution as the Commissioners of Inland Revenue may on application approve, and the Commissioners shall on application approve any institution which is in their opinion capable of handling such an account, bearing in mind the conditions hereinafter provided, the interests of persons on whose behalf accounts are opened and the need to protect Her Majesty's revenue.

(3) An Employee's Savings Account shall be operated subject to the following conditions—

(a) it may be opened by any employer on behalf of an employee, or, in the case of a self-employed person on his own behalf;
(b) sums of money, stocks and shares or other securities may be placed in an account by an employer on behalf of the holder of the account, or, in the case of a self-employed person, on his own behalf;
(c) the total value of any moneys or shares or securities so deposited in an account shall not exceed in any year of assessment the sum of two hundred pounds;
(d) interests or dividends due on any money or securities held in an account may be paid into the said account;
(e) without prejudice to paragraph (g) below, no other money may be paid into an Employee's Savings Account, nor any other shares or other securities deposited there;
(f) any moneys or shares or other securities deposited in any account shall thereby become the sole property of the individual on whose behalf they have been deposited and this shall not in any way be affected by any subsequent change of employment;
(g) any individual on whose behalf an account has been opened may at any time at his own discretion sell shares or other securities held in his account, may withdraw or leave in the account the money raised by such sale, may purchase new shares or securities with funds standing to his credit in the account, or withdraw any money standing to his credit in the account;
(h) any joint-stock bank or other approved institution may offer and pay interest on moneys deposited in an account; and
(i) no person may have more than one Employee's Savings Account opened on his behalf.

(4) Where the total income of an individual for the year of assessment includes, or would


but for this section include, any sum deposited in an Employee's Savings Account by his employer on his behalf or, in the case of a self employed person, by himself, or any sum equal to the value of shares or other securities so deposited, such sum shall be disregarded for all the purposes of the Income Tax Acts other than the furnishing
Provided that in the event of any individual withdrawing any money from his account other than dividends or interest, an amount shall be chargeable to his assessment under Schedule E income tax for the year in which the withdrawal takes place equal to—

(a) the original amount of the money withdrawn from the account at the time at which it was deposited in the account, or, in the case of shares or other securities which have been disposed of and the proceeds withdrawn, their original value at the time at which they were so deposited; or
(b) in the event of any shares or securities being worth less than this at the time at which they were sold or exchanged, regardless of whether they were withdrawn from the account at that time or subsequently, the value realised in such sale or exchange.

(5) Where the total income of an individual for the year of assessment includes, or would but for this section include, any sum paid or credited to an Employee's Savings Account in respect of interest on moneys deposited therein, those sums shall be disregarded for all the purposes of the Income Tax Acts other than the furnishing of information if or in so far as they do not exceed fifteen pounds.—[Mr. Richard Wainwright.]

Brought up, and read the First time.

Mr. Richard Wainwright: I beg to move, That the Clause be read a Second time.

The Chairman: With this Clause we can discuss new Clause No. 40—"Tax relief for regular savings or insurance schemes", and new Clause No. 41—"Relief from income tax on the first £15 of investment income", with a Division on new Clause No. 40 if desired.

Mr. Wainwright: There is an error in the Clause as it appears on the Notice Paper. Unfortunately the words "of information" have been omitted at the end of line 41. Line 41 should therefore read:
shall be disregarded for all purposes of the Income Tax Acts other than the furnishing of information.
This formula appears from time to time in the Clause because, although we seek tax advantages for certain savings, we do not seek the extraordinary and ultimate advantage of National Savings Certificates, that of not being returnable

to the inspector of taxes. We do not say that the savings we seek to encourage should not be returnable but that they should not be assessable.
The Clause would benefit the citizen and the Exchequer. The private citizen with a much wider effective choice of savings media would benefit especially when he had something, however small, to put by as a long-term investment and which he wanted to protect from the erosion of inflation. We also want to provide the Exchequer, for which we feel strong concern, with a much greater volume of savings.
On the cost of this provision, we follow the Chancellor's message in his 1966 Budget statement:
The message is clear: 'More savings, less tax'."—[OFFICIAL REPORT, 3rd May, 1966; Vol. 727, c. 1440.]
Unfortunately, the British public largely did not get that message and have not yet got it and we are offering the right hon. Gentleman a loudspeaker to get it over.
We seek definite and attractive tax advantages for a variety of savings. The last 50 years have proved that tax advantages enormously influence the success of savings schemes. If we join the E.E.C., one of the greatest things which we shall take in is some of the most varied, reliable and efficient methods of institutional savings in the world, which have been built up largely with the impetus of considerable tax advantages. Our pensions schemes, life assurance and industrial assurance schemes, the whole range of National Savings for the small saver and, of course, the building societies are all powerfully assisted by different tax advantages which Parliament has given.
Unfortunately, a price has been paid for the efficiency of the savings media and it is the comparative neglect of channels for taking small savings direct to industry. Compared particularly with the United States and West Germany, our assistance to the small saver to invest directly in industry is under-developed, and this is what we particularly want to remedy.
The Clause seeks four main forms of tax advantage for limited amounts of annual savings so long as they remain effectively saved. So long as these


securities remain effectively saved, we ask that Income Tax should be wholly deferred, which means that if and when they are withdrawn from the banking institution authorised to hold them tax-free, they will be subject to Income Tax at the rates and under the rules prevailing. Therefore, in the fairly obvious instance of the employee or self-employed person who puts shares or money away when earning at a high rate and withdraws them in time of sickness and old age, his effective rate of tax will be lower than when he was fully employed.
The second advantage is that the umbrella of the banking institutions would be a complete insulation not only against the payment but against the computation of Capital Gains Tax.
Third, we propose that, while these monies are in the custody of the banking institution, any interest which they attract should be tax-free up to the now customary figure of £15 a year. This might excite some criticism from the Treasury Bench as each party, when in power, has been desperately anxious not to extend this privilege, which is extended to investors in the Post Office and Trustee Savings Banks.
However, since we are trying to provide an incentive to savings, it would be wrong to insist that they should be taxed on the interest while in the bank. The Exchequer may regret the generosity which allowed this tax-free privilege, but it is with us and should not be withheld from any acceptable form of savings.
The fourth major tax advantage which we seek is that there should be no assessment on the discount element of shares which an employer makes available to his employees. This is particularly important, as the history of those industrial countries which have encouraged employee shareholding shows that the issue of shares at a discount is particularly valuable.
The Financial Times of 14th March this year said:
In 1960, only 12 per cent. of the manufacturers listed on the New York Stock Exchange had stock purchase programmes for their employees. Last year"—
that is, 1966—
this figure had risen to 22 per cent.
In the course of the investigation by the National Industrial Conference Board in New York, which produced this informa-

tion, is was found that about half the plans that they analysed allowed an employee to buy stock at a discount to provide him with additional protection if the price of his stock were to fall. This is of great importance when people are starting their careers as investors because an early fall in stock for which they have paid good money has an extremely discouraging effect.
10.0 p.m.
We recognise—as the Liberal Party has recognised for a long time—that a provision of this kind is only one form, and certainly not the only form, of securing worker participation in industry. However, it has the great merit of being easily and conveniently available and much good is to be achieved by the sort of tax incentive which the Clause provides. As Liberals, we look forward to a period when there will be much wider measures of employee participation in the control and direction of industry and a bigger share in its rewards. But in preparation for the time when this comes about, we want to see employees becoming familiar with the responsibilities of share ownership, with company structure and with all that goes with the role of an ordinary shareholder.
We have high hopes from the Government because the Clause is not new. It was, in substantially similar form, debated in Parliament in 1958 on the Finance Bill of that year. On that occasion the right hon. Gentleman who is now the President of the Board of Trade said:
The aim of this Liberal revolution is thoroughly laudable. It is the spread of ownership of shares over a higher proportion of the individuals of the community."—[OFFICIAL REPORT, 2nd July, 1958; Vol. 590, c. 1496.]
We see no reason why the right hon. Gentleman should have changed his mind in the intervening years and we see every reason why he should have influenced his colleagues to support his view.

Mr. MacDermot: I hope that the hon. Gentleman is not misleading the House into thinking that my right hon. Friend supported the proposal.

Mr. Wainwright: I was hoping, knowing the discipline of the party opposite, that over the years the right hon. Gentleman had influenced his colleagues into supporting the view he then adduced. I


also hope that the same might be said of his party's management.
As for the Conservative Party, we hope that all that Conservative hon. Members have said in recent years about a share-owning democracy will lead them to support the Clause. The only argument which their Chancellor, now Lord Amery, was able to adduce against a similar proposal in 1958 was the curious Gladstonian argument that
… Income Tax should fall impartially on all income from all sources …"—[OFFICIAL REPORT, 2nd July, 1958; Vol. 590, c. 1495.]
Since then the Tory Party has been reinforced in the House by the members of the Bow Group and progressives of various schools of thought. We hope that we will see the fruits of the younger generation of Tories steering their older colleagues away from the purely Gladstonian view of the rôle of Income Tax.
We sometimes flatter ourselves that world prosperity in recent years has narrowed the gap between the wealth of different sections of the community. But I ask the Committee to consider whether this narrowing of the gap is not superficial and highly precarious because it is based far more on temporary income than on a real shift of ownership of wealth.
In a sense, the community is still divided between the few who are masters of their own savings—who control, so far as man ever can, their own fortunes—and the vast mass of the population who, although, broadly speaking, are more prosperous than their counterparts of a generation ago, are still precariously dependent on income from week to week. The object of the Clause is to clear part of the jungle which separates the mass of the people from share ownership and control over their own fortunes; control which, we believe, is their right.

Mr. Paul Dean: There will be agreement on both sides of the Committee with many of the points made by the hon. Member for Colne Valley (Mr. Richard Wainwright). I wish to concentrate on New Clauses 40 and 41. I am not claiming that these proposals—particularly Clause 40, which is fairly broad—are in any sense technically perfect, but I hope that the Financial Secretary will not rely on drafting arguments.
The main point we wish to put forward is what we regard as a sound principle and, like all sound principles, it can be stated simply and shortly. It is that thrift benefits the nation and the saver. It provides security for the saver and his family and the seed corn for future national prosperity. I hope that the Financial Secretary will not use narrow legalistic arguments about the canons of taxation law. After all, those are not unalterable; they are there to serve the needs of the community and not to be our masters. I hope, too, that he will not take his stand on what we sometimes hear from the present Treasury Bench about the purity of our taxation system. Far be it from a Government which have introduced Corporation Tax, Capital Gains Tax and Selective Employment Tax to talk about the purity of our taxation system.
It is also the case, as the hon. Member for Colne Valley has said, that tax relief is already granted to certain forms of savings. It is given in recognition of the extra expenses incurred by the man with a family. We grant tax relief on occupational pension schemes and on life assurances. Those are just examples of tax reliefs. We believe that they are right, and that they should now be extended.
We also totally reject the notion that tax allowances mean "giving away" money, and that they "cost" the Exchequer so much. We have not yet got to the stage where the Government of the day own the money we earn, although this Government are certainly trying to dictate how much we earn through their prices and incomes legislation. Tax allowances mean that the Government take a little less of our money than they other wise would. It is true that tax allowances mean a certain loss of revenue, but if the Government took less of our earnings, if they encouraged thrift, self-help and increased savings, the country would be a good deal better off than it is.
The case for the greatest encouragement of regular savings has been deployed on many occasions, not least by my hon. Friend the Member for Farnham (Mr. Maurice Macmillan) and the Wider Share Ownership Movement. I propose to say very little about that except to emphasise that we are constantly being told by the Government that we are consuming too


much, with all the problems of inflationary pressures that that creates; that we are indulging, as the party opposite likes to call it, in expenditure on candy floss. In so far as there is any weight in those arguments, the more we can encourage people to put their money into savings the more those arguments are likely to be met. I propose to concentrate very largely on contractual insurance, which is dealt with in the Clause, and place it in our social services and taxation policy.
There is little doubt that the Government are facing a growing dilemma. They face a situation in which the momentum of the development of the social services is slowing down. And one has only to read or listen to the Socialist intellectuals to have this point demonstrated very clearly. I give only one quotation, and that is from Professor Brian Abel-Smith's pamphlet "Socialist Affluence". Looking at the calculations made in the National Plan that is now defunct, Professor Abel-Smith says:
The calculation shows that the public services (current) and housing increased by 34·5 per cent. in constant prices between 1958 and 1964 and are planned to increase by only 28 per cent. between 1964 and 1970. Thus the absolute rate of growth was greater in the six years preceding 1964 than in the six years planned from 1964 onwards.
There is no wonder that there is disillusionment on the benches opposite about the way in which the social services are developing, but those figures were on the basis of the National Plan, and we all know that that will not be achieved.
Not only do we have this slowing up, but we have had stiff increases in direct taxation. The Financial Secretary acknowledged this dilemma only last Friday when replying to a debate when he said:
… growth in public expenditure on the social services is a matter of great concern to the Government, not least because of the claims that it makes on the resources of the economy, but also because of its implications for taxation."—[OFFICIAL REPORT, 9th June, 1967; Vol. 747, c. 1535.]
Incidentally, what a contrast this is to the good old days of Tory Government when we had both substantial increases, real increases, in social service expenditure and reductions in taxation at the same time.
We know that the Government believe in high taxation—we have heard it from

Treasury Ministers time and again during this Finance Bill—but even they admit that there are limits to the extent to which direct taxation can be put up, so they face the dilemma of the slowing down of the advance in the social services and rising taxation at the same time. We believe that one of the ways out of this dilemma is to encourage private provision so as to relieve the pressure on the State services and to bring additional resources to social welfare as a whole.
Why is this dilemma becoming more acute? It is partly because of the very large figures which are involved. Current expenditure on the social services is now well over £5,000 million a year, and that amounts to about 50 per cent. of all Government current expenditure, and of that figure no less than 70 per cent. comes out of taxes and rates. This must present a budgetary problem of a very difficult character to any Government.
But there is another equally important factor which in the long term is growing in importance, namely, the inevitable built-in growth factor in most of these services—the fact that standards are rising, that a social service benefit which five years ago was satisfactory is no longer adequate, the fact that medical science is improving all the time and that treatments are becoming more costly, the fact that we have and will continue to have a growing proportion of our population who are non-earners, who are either young or old.
The dilemma was stated extremely well in an article in The Times by Mr. Peter Jay on 31st May. It is interesting to note that most of the evidence which I am calling is from people who, on the whole, are sympathetic to the cause of hon. Members opposite. Peter Jay makes an interesting calculation. He estimated that social service expenditure at constant prices would rise by more than 60 per cent. between 1965 and 1975 to keep pace with current policies, not to improve, but simply to keep pace with them. He estimated that this would mean an increase in taxation of about £200 million each year, unless there were cuts in Government expenditure elsewhere. He came to this rather arid conclusion:
Any further increase in taxes, additions to industrial costs and preemption of resources for Government social expenditure would


entail a greater degree of austerity towards privately financed personal consumption than is commonly supposed to be politically possible.
10.15 p.m.
This is the dilemma in which the Government find themselves. I do not suggest that those figures are necessarily accurate, but the broad drift of the argument put by Mr. Peter Jay is one which has appeared increasingly in recent years and months. We should encourage people voluntarily to solve this dilemma for the nation and for themselves by devoting more of their income to family insurance. People are doing this already. Occupational pension schemes, encouraged as they are by tax reliefs, now cover well over half the population. Health insurance covers about 2 million people and is growing at the rate of 10 per cent. a year.
But for personal health insurance there is no tax relief. Anyone who takes out health insurance pays his taxation towards the National Health Service and his health insurance contribution but there is no tax relief of any kind. In other words, in this instance, as in the instance of education, the tax scales are weighted against private provision and self-help.
These occupational pension schemes and health insurance schemes are now by no means confined to a few rich people. They are spreading down the income scale, and surveys show that a substantial and growing number of people wish to provide much more for themselves. One recent survey asked, "If you were given the choice of paying increased taxation to improve the State services or greater encouragement through tax relief and the like to provide for yourself, which would you choose?", and over half the people questioned plumped for the second, to provide for themselves rather than to pay more taxation in order to have additional provision through the State services. We shall neglect this growing upsurge among a wide range of our community at our peril.
It is said that, if we were to encourage private voluntary insurance in this way, the State services would suffer. In fact, the very opposite is true. How many

more millions of pounds would we be spending now on supplementary benefits were it not for occupational pension schemes and life assurance? The same is true for health insurance which gives cover for private treatment. One of the organisations, the B.U.P.A., has set up, through its sister organisation the Nuffield Nursing Homes Trust, hospitals and nursing homes to provide surgical and other treatment, and no fewer than 11,000 patients were treated in these homes last year. Here is a concrete example of the National Health Service being relieved of pressure at no cost to the State whatever. In other cases, where private patients go into private beds in National Health Service hospitals, they pay for their beds, they pay the full cost, thus providing additional revenue for the National Health Service. The same is true in education. How much more would our education service cost the State were it not for the 250,000 children being educated privately at no cost to the State whatever?
Another argument used is that the extension of private services through tax relief would draw off scarce medical resources from the State service. I believe that that also is incorrect. Under our present arrangements we are already faced with a serious and growing brain drain of doctors going abroad for a variety of reasons. It is at least arguable that with the extension of private provision some of those doctors would continue practising in this country.
The same happens with nurses. There are nurses who, for a variety of reasons, are not prepared or not able to work in the National Health Service, but are retained in health work because the private institutions can use their services. Therefore, I do not believe that either of those arguments is correct—either that the State services suffer or that scarce medical resources are drawn off. The opposite is rather the case.
My conclusion is that the desire for saving and accepting growing personal responsibility for welfare is increasing all the time, that it is socially and economically right, and that it can be the salvation for the standards and development of our State social services. Now is the time to give this healthy trend the boost and encouragement which it needs and deserves.

Mr. Barnett: I wish briefly to refer to new Clause 2, which was moved by the hon. Member for Colne Valley (Mr. Richard Wainwright) on behalf of the Liberal Party. It is nice to see so many Liberal Members here, and it is a pity that they do not move more new Clauses. But it would be fair to say that the Clause is a typical Liberal crackpot scheme. I could have understood some of his hon. Friends moving it, but I find it difficult to understand his doing so.
I am sure that the idea was put forward with the best intentions, but it clearly had not been thought out, because the loopholes for evasion and avoidance are absolutely massive. Either the hon. Gentleman was not aware of them or he did not think it necessary to mention them. I am rather surprised. I am sure that he must have thought of some of them, especially, for example, that the opportunity for self-employed people to reduce their taxable income by £200 a year would be something that no self-employed person could resist. Equally, with an employee, the opportunity to reduce his income by £200 a year would be irresistible, without having any real effect on net saving. There are opportunities of doing it either by borrowing, for example, or taking existing savings, withdrawing from them and switching yearly.

Mr. Richard Wainwright: Does not the hon. Gentleman agree that this switching is exactly what happens every time the Chancellor, as he has done this year and last, announces further facilities for National Savings Certificates to be purchased?

Mr. Barnett: I had misunderstood the hon. Gentleman. I thought that he and his party were looking for a new form of savings, for an increase in net savings. If he is now telling us that they are not looking for any new net increase in savings I wonder why he brought forward this crackpot Clause. Not only are the loopholes for evasion and avoidance enormous, but the Clause makes administrative nonsense, as the hon. Gentleman must have known. One has only to think for a moment about the difficulties in dealing with the P.A.Y.E. scheme, of withdrawals into a savings account and payments back into it, the adjustments in the code number or the

tax deductible weekly—not annually—to understand the sort of administrative problems that would arise.
We talk about Capital Gains Tax being complicated, but it would have nothing on the scheme proposed in new Clause 2, which stems from Liberal ideals that one can get something new from gimmicks. If Liberal hon. Members had thought out this problem, I am sure that they would have understood—I am sure that the hon. Member for Colne Valley understands—that this idea, which I honour by calling it an idea, could not result in any net extra savings.
The whole concept of the Clause stems from the idea that there is some miracle to be performed by a massive increase in net savings. We all pay lip-service, and more, to the idea of trying to increase net savings. Every Chancellor has pointed out that if we could achieve this we could save increases in taxation. Strictly speaking, that is true. But we should at the same time honour the ingenuity of those concerned with the National Savings Movement over a long period because they have dealt with many forms of saving, both for small savers and for others. They have done it by way of gimmicks, as, for example, the Premium Bonds, which did not really result in any net savings either. Almost every form of savings has been tried, including the Post Office Savings Bank and National Savings Certificates.
If we go on pretending that there is some miracle whereby we can get a massive increase in net savings, we are in danger of doing ourselves a great disservice. One would like to think, and I suppose that it is true, that we could get some increase in net savings by using modern techniques of salesmanship—perhaps a television savings bond of some kind. But the real net savings increase overall, excluding switching, would not likely be so massive as many of us would like to see.
I would like to see the Government giving some thought to improving sales techniques of savings. I would also like to see hon. Members stop pretending that in some way we can reduce taxation in a big way by some form of new savings. But I hope that we shall not get the sort of stupid administrative


idea incorporated in this Clause by the Liberal Party.

Mr. Bessell: I shall not bother to refer to the speech of the hon. Member for Heywood and Royton (Mr. Barnett). He always manages to combine offensive terms with his ludicrous speeches when he refers to the Liberal Party, and he does it with a facility which almost causes me to admire his efforts.
I want to refer to the new Clause moved so admirably by my hon. Friend the Member for Colne Valley (Mr. Richard Wainwright), because it contains in it one particular provision which the Liberal Party has always believed is of vital importance to the interests of that section of the community which has for too long been called the working class—I say for too long because it is thereby separated from the rest of the community in a way that is not only offensive but quite unnecessary in these days.
The Liberal Party has always believed that it is imperative for the people who work in industry at all levels to have a share not only in the profits of their labour but also to have a major share in the responsibilities of the administration of the company concerned. I do not hesitate to pay tribute to the Labour Party for its long history of jealous protection of the rights of the working people. It has done a job which is not only the envy of the rest of the world but which is admired on this side of the Committee as well as on its own side. But it is strange to me that it has never managed to take that one further step forward, the step which would break down this ugly division which exists in our country, the division which seeks to separate the people of this nation into two parts, those who employ and those who are employed.
10.30 p.m.
I do not believe that we can ever have maximum production from any of the branches of industry which thrive in Britain and are the natural source of our wealth till that division can be broken down, till we can bring about a genuine partnership in British industry, a partnership which is based on mutual trust because there is a mutual participation in profits and a mutual responsibility

for the success of the company or firm concerned.
As the Committee will know, the Liberal Party has sought by one means or another—over many years—to introduce into successive Finance Bills Amendments which would provide an incentive for employers to embark upon schemes of co-ownership or co-partnership which, in my view and the view of the Liberal Party, would go a long way towards bringing about this partnership in industry between the two sides and rid the nation of this ugly barrier which divides the worker from the employer. We have never, it is true, been successful in persuading either of the other parties to accept in a Finance Bill a Clause or an Amendment to a Clause which would provide this incentive for employers.
This time we have sought, as my hon. Friend the Member for Colne Valley has already told the Committee, to provide that incentive through this new Clause which he moved so eloquently.
I should like just for a moment to dwell on the reasons why I consider that, if the Government could be persuaded to accept this new Clause, and if we could make a start towards a genuine partnership in industry, this would be of such enormous benefit to the nation as a whole. It is recognised that in the last few years we have not been able in this country to produce the kind of output in industry to enable us to compete effectively with those nations of Europe which are selling in many of the markets which were formerly almost exclusively our own. This is because of the fact that there is, in my view, an absence of genuine incentive to the working people today. They do not feel that they have the dignity of enjoying ownership within the company or firm by which they are employed; they do not have the same benefits in terms of profits which go to the shareholders and to many of the directors who control their activities; they do not have the same ability to sway decisions which are made by the directors, or by shareholders who, often, never see the factory floor.
We in the Liberal Party believe that the only way in which we can really see a genuine increase in production is by providing this incentive to the employees in industry, by giving them some of the


dignity of being employers, by giving them some of the responsibility which at present is shouldered by only one section of the industry concerned, by giving them some of the profits which go into the pockets of the present shareholders.
I know that it is frequently argued that this would be unfair to those people whose capital is at present employed in industry and that it is right that they should enjoy the maximum profit from their investment, but the evidence of those companies and corporations in the United States of America and other parts of the world which have embarked on co-ownership schemes is that the increased production, the consequent lowering of production costs and the inevitable increase in sales to the public have resulted in an improvement in the net profit to the original shareholders or stock holders as well as providing a profit for those working on the factory floor.
This evidence, combined with the fact that this system of joint ownership in industry would break down the barriers to which I referred earlier, barriers between employer and employed, and bring about a greater dignity to those in the employed class of industry, and would bring a higher rate of production, is something which I ask the Chancellor to consider seriously. I ask him to rid his mind of the prejudice which has existed not only in the minds of members of the Labour Party, but in many trade unions, against any system of participation or joint ownership. I ask him to look at the thing purely on the merits of the case for improving productivity and thereby assisting Britain's export drive. I ask him to look at it, too, on the social merit of breaking down these barriers which we all know to have worked so much to the detriment of the progress of the nation.
I do not share the optimism of my hon. Friend the Member for Colne Valley and I do not think that the Financial Secretary will accept the Clause, but I hope that between now and Report the Chancellor will think about the arguments put forward, not only in the Committee tonight, but in many parts of the world by learned economists and sociologists about the advantages of a system which provides for voluntary co-ownership.
There is no reason why on Report an Amendment should not be introduced which, by one means or another, would encourage employers to spread the ownership, if they wish to do so, of their companies and firms and thereby at least take one step forward towards bringing about the kind of partnership which Liberals believe to be the only way, in the last analysis, of resolving the unrest, the suspicion and the mistrust which exist in British industry at many levels and which have hampered production and prevented the growth of a genuine property-owning democracy.

Sir Douglas Glover: Having listened to the debate so far, it is with great chagrin that I find myself supporting the hon. Member for Heywood and Royton (Mr. Barnett) more than the Liberals. Of course, emotionally we all want to bring about what the Liberals suggest in the new Clause. Nothing would give me greater pleasure than for the whole of industry in this country to be a sort of co-operative organisation in which all the employees were shareholders. But we have to accept that human beings are all different from one another.
There are some people, who, if they are given £100, would spend it in a week, while there are other,, about 5 per cent., who will buy shares, and save the money. The Liberal Party has the idea that people should buy shares in the company for which they work at a discount. My commercial attitude to this is that all the English people whom I know think that there must be something wrong with anything offered to them at a discount. If one tries to sell them shares in a company at two-thirds the market price they will ask:
What is the gaffer up to now? He is trying to take us for a ride.
They are suspicious. Every year they see great placards in shop windows, advertising goods at half price. They buy things and then decide that they are sorry to have bought them. If one starts selling shares at two-thirds the market price they will think that there is a catch in it. [An HON. MEMBER: "They may be right."] They may be right. This is one of the great problems about obtaining a widening of a share-owning democracy. There is nothing that I would love to see more than that


everyone should own shares in the company for which they worked.
I do not think that life has altered much. We talk of Unilever, which is probably the largest company in this country, and about the third largest company in the world. Where did it start? My great-great-grandfather, who was a doctor, provided £100 for Mr. Lever to start making soap in his back kitchen.
He was the man who conceived it, and out of that developed Unilever, with its most extraordinary ramifications. At present there are young, vigorous people starting companies who cannot offer much to shareholders, to those who are working in the business. The business might go bankrupt in 12 months.
Suppose that I start a business with five employees and I ask them to give me £100 out of their salary and in 12 months' time we go bankrupt. I do not know if they would be very grateful to me, but in most cases they would probably have me in the courts. Suppose that I do not ask them for the money and 12 months later I have overcome the first hurdle and the business is growing. Now I have 25 employees, and I am not so keen on asking them to join, because it is my money and it is beginning to make a profit.
This is the way that businesses grow. They do not grow in theory, they grow in actual practice of people doing things. All these Amendments from the Liberal Party seem to suppose that there is a sort of business which stops at a certain point—when one stops all effort and says, "We will ask all employees to be shareholders." But the people working for the company then would not be the same as those who worked for it 12 months ago, and would not be the people working for it in 12 months' time. One is not dealing with a static working population.

Mr. Bessell: The hon. Gentleman has advanced his theory, to which I listened with great interest. Would he now be kind enough to address himself to the reasons why certain American companies, including Chrysler, and certain British companies, including I.C.I., and the John Lewis Partnership, have found it possible to embark on co-ownership schemes, if his argument is correct?

Sir W. Bromley-Davenport: I have the answer to that one.

Sir D. Glover: Take I.C.I. No person has been more disappointed than I over this. Statistics show that about 50 per cent. of the shares in the so-called I.C.I. share ownership system are sold within three months of being received. In other words, it is only another way of giving the employees a bonus. Some people hold on to their shares. There are others who, even if they had been paid the bonus in cash, would have bought shares. In other words, they are the people who want to acquire shares and will give up the benefits of today for the benefits of tomorrow.
10.45 p.m.
I know many people who, if they are given £500, will have a jolly good holiday and spend the money, but who is to say that in the long run they do not have a happier life? Other people, if given a similar sum, will invest it in I.C.I. There is an enormous difference between the mentality of the person who wants to become the owner of shares, and the person who wants to have a happy life and spend his money. There are not all that number of people who want to forgo the benefits of today for the benefits of tomorrow. Perhaps this is one of the great troubles with the nation at the moment. There are not enough people who want to forgo today's benefits for some increased benefits in 20 years' time.
Having given a great deal of time to the Liberal proposals, perhaps I can come to the admirable speech of my hon. Friend the Member for Somerset, North (Mr. Dean). This really follows on the remarkable debate that we had last Friday on a Motion moved by the hon. Member for Pembroke (Mr. Donnelly) on the simplification of Government. I made a speech, and perhaps I can tell the hon. Member for Heywood and Royton that afterwards one of his colleagues said to me, "Douglas, for the first time in my life I agreed with everything you said".
But what did I say? I said that in the social welfare field the public would pay by way of taxation only sufficient to provide what I would call the floor of that service, and therefore if we want to increase the benefits of the Health Service


we must give people the right to pay for increased benefits in it, and it is that with which one hon. Gentleman opposite agreed. The right hon. Member for Sowerby (Mr. Houghton) went a long way towards saying the same thing. I have talked to many people, mostly, I think, supporters of the party opposite, since I made that speech, and they all agreed with me.
This House is way behind the thinking of all those who have really studied the problem of what we are going to do about social welfare. We have to take it that human beings are prepared to help their mates, their colleagues, but they are prepared to help them only to a certain level. They are not prepared to be deprived of the benefits of their efforts by taxation to the level that it really affects their standard of life if they can see people on the other side of the road enjoying an excess benefit from that social welfare.
If we are to get a really good Health Service we must provide the opportunities for people to spend, or insure—I think that insure is a better word—beyond the bottom level. If we do not do this, we will not only not make progress in providing for the well-being of people in this country, but the Health Service will break down.
It is not as though we are talking of a wonderful edifice rather like Constantinople, before it was attacked by Suliman the Magnificent, but an edifice which is breaking down and which needs money. The only way to get that is to have additional revenue and, therefore, I hope that the party opposite will begin to take more notice of this because they are the only people who can implement what is suggested.
If they are honest, they must admit in their own hearts that even the so-called progressives are finding an increasing appreciation of the fact that we shall never get really good welfare on the basis of the soup kitchen mentality for the simple reason that that way nobody will get above the bottom level. It is becoming fundamental thinking in the Socialist brains trusts, and the progressive societies and the ordinary people want to talk about this problem.
If we are to get the welfare society which provides the sort of standards

which we want, it will require a great deal more private insurance than we have accepted up to this moment, and the final thing which I want to say—[Interruption.] Well, I do not mind if everybody gets bored and walks out. I shall still get into HANSARD. The final thing I want to say is that in the time during which I have been in the House, I have come to believe that the great weakness of democracy, and it is democracy about which right hon. and hon. Members opposite talk so much, is that we spend nearly all our time arguing about the problems of 20 years ago and not in throwing our minds into the future. Let us, for example, take the Health Service.

The Temporary Chairman (Mr. Bryant Godman Irvine): That is not relevant.

Sir D. Glover: I think that it is relevant because the producing machinery would produce what I am going to say in a moment.

Mr. MacDermot: The way to accept order is to accept the Ruling of the Chair.

Sir D. Glover: I will accept order from the Chair, but not from the hon. and learned Gentleman.
Dealing with any Amendment of the sort which we are now discussing we have to try to think what it is that we are doing and why the whole atmosphere in this country is going to alter in the next 20 years. We on this side of the Committee are preparing for the right sort of pattern in which the people would want to live.

Mr. Maurice Macmillan: I support the Amendment standing in the name of two of my hon. Friends and the principle which underlies the Amendment tabled by the Liberal Party, although the massive increase is almost as over-optimistic as the principle. I would not associate myself entirely with the rather limited aspects of co-ownership and co-partnership implied in some of the speeches which have been made in support of this new Clause, although it is not specified in the actual wording of the Clause itself.
It is about 20 years now since the Wider Share Ownership Movement, to which reference has already been made tonight, was first talked of; and it grew, not from Liberal ideas, but from a Conservative


Party pamphlet written and published by my noble Friend, Lord Aldington.
I am happy to say that since those days it has received noble support from the Liberal Party and from many right hon. Gentlemen opposite. Successive Governments have accepted the principles that we have put forward from time to time. But alas, few people have been moved, either by the logic of our case or the eloquence of our supporters, to put any of those principles into practice.
In making this statement I am not making a party political charge. When I refer to "the Government" I am not so much referring to the principles, economic or political, of the politicians, but to the position which emerges from the entire Governmental apparatus and machine. I confess that in my short stay in a junior capacity at the Treasury there was little I could do to alter these attitudes, although I initiated one or two ideas which have been put into practice. We have put forward various schemes of employee shareholding, not necessarily the employee holding shares in the company in which he works but more in the nature of the American pattern, with equivalent provisions for self-employed persons. Perhaps I am prejudiced, but I think they were more realistic than the proposals contained in the Liberal Clause.
My hon. Friend the Member for Somerset, North (Mr. Dean) referred to the results of the various schemes which are in operation. He mentioned that three-quarters of the employees who received shares in this way sold them and regarded them as a bonus. This is true, but it is rather like the optimist or pessimist looking at his glass and saying, "It is half full" or "It is half empty." Equally, one could say that one-quarter of the employees of I.C.I. now have shares in the business which they would not have had but for the operation of this scheme.
The hon. Member for Colne Valley (Mr. Richard Wainwright) referred to Lord Amory's defence of the impartiality of the tax system; that it should fall equally on all taxpayers, regardless of how they spent their income. That is the classic case which any tax expert would put forward. It is understandable for the Inland Revenue or a Tory Chancellor to adduce that argument, but I find it harder

to understand when it is adduced, as it no doubt will be, by a Labour Financial Secretary, for the present Government seem curiously reluctant to use the fiscal system for social purposes in the way they accused us of being frightened of doing when the Tory Party was in power.
The record of the parties shows that while we may not have preached quite so eloquently, we were a little more efficient. In encouraging savings, we should seek to encourage all savings, and in doing so I would argue that the economic situation which confronts us, and which has confronted us for many years, is totally different from that which existed before the war. It is different in a way which has not yet been recognised by the attitudes of successive Governments; and that goes for the problems of savings, investment and shareholding.
One of the major pre-war problems was that of getting a level of investment that matched the then level of savings. Since the war the problem has been that of getting savings at a rate which matches the need for investment. The Chancellor is constantly referring to the necessity for people to save more so as to be taxed less. The surveys that have been made of the capital needs of the country, projected into the future, to 1975 and 1980, show that unless a substantial increase can be made in the level of personal savings, the capital required by industry will become provided, in increasing proportions, by major institutions and that the people will have a smaller direct investment in the production of wealth.
There is one other happy difference from the pre-war situation. Increased social security benefits, although there are problems, have largely eliminated fear as a motive for saving and investment. I am not so cynical as to assume that fear and greed are the only motives for human conduct, but the removal of the fear that the loss of one's savings will leave one destitute—which I am glad has been removed—nevertheless leaves a gap which successive Governments have not yet filled.
11.0 p.m.
Therefore, two major changes in our social life have not yet been recognised and should be recognised by this Government, in view of their past statements and accusations, as they fundamentally prefer


the sort of system which produced the changes and the accompanying problems. The Clause would extend the small dividend privilege to all incomes and not just those received from lending to the Government. It has been argued that the privilege is much greater for the rich Surtax payer than for the small saver, but this bias becomes much less in investments on which the return is far greater than the miserable return to the small investor who lends to the Government. There is, therfore, a strong case for extending the allowance to all investment from income.
I hope that the Chancellor and the Financial Secretary have not eliminated the possibility of some form of contractual savings plan under the umbrella of National Savings to meet some of the possible criticisms of the existing National Savings certificates. The only comment I would add to the wonderful speech of my hon. Friend on the problems described in the new Clause is to hope that, by drawing it so widely, we will be told the Government's thoughts on contractual savings generally and the fiscal encouragement which may be given to such schemes, whether or not they include pensions schemes and a social service element.
Savings can be increased, although it is difficult, but it requires a new approach, not only to increase them but to maintain the existing level in an economic situation which is discouraging for the saver and investor. It is a question not only of increasing savings and investment but of social, as well as political and economic, purposes, of spreading the ownership of the country's wealth.
That is why I cannot go with the Liberal Party in its view of co-ownership and co-partnership, because it is not only the weekly wage earner who is concerned, but, in some cases, the relatively high-salaried employee also finds it difficult to become an owner in any significant sense. In some ways, it is very wrong that those on whose energy and initiative the creation of wealth so much depends should, owing to our fiscal system, find it so hard themselves to acquire part of the capital they have helped to create.
It is not so much a question of encouraging people to take part in the management and the responsibilities of the businesses that employ them, because

that seems to me to be a confusion between the functions of workpeople, staff, management, directors and shareholders. It is rather that there is no reason why anyone, no matter what his individual rôle may be as a worker in industry, should not become the owner of industrial equity not restricted to their own company but in general terms.
As time goes on, the greater the difficulties that the earner, even the very high earner, finds in becoming an owner, and it remains relatively easy for the man or woman who is basically a dealer rather than an earner. There is an increasing need for private capital, private investment, and a widening spread of ownership.
I do not ask the Financial Secretary to accept any of these Amendments. I do not even expect him to do something on Report. I am being very modest in my request, which is that he will give a sign that the rigid attitude of successive Governments towards giving fiscal encouragement to savings, investment and ownership is at last becoming a little more flexible.

Mr. MacDermot: The hon. Member for Colne Valley (Mr. Richard Wainwright) said that the object of the new Clause was to encourage savings, especially from small savers, and to provide the Exchequer with a greater volume of savings. Any scheme which held out a fair and serious prospect of achieving that objective—and I assume that by encouraging savings the hon. Member meant new savings—would obviously receive very sympathetic and favourable consideration from any Chancellor of the Exchequer. But I fear that the criticisms of this scheme advanced by my hon. Friend the Member for Heywood and Royton (Mr. Barnet) are all too much to the point.
The difficulty that we encounter here, as with all schemes that I know of to date for the encouragement of savings by way of tax relief, is that no one has succeeded in devising a means of seeing that the benefit of the schemes would go to the new saver, or would do anything more than marginally to increase the actual volume of savings, and that the greatest benefit would not, in fact, go to people who already had saved—and the more they saved, the wealthier


they were, the greater would be the benefit. These are the well-known difficulties.
Such a large and generous scheme as has been advocated tonight would be costly to the Exchequer in a way that could not be justified unless it could be proved to the hilt that it would produce some very tangible and substantial benefit to the economy. At the moment, there are reliefs under our taxation system for savings. By far the most important is life insurance relief in its many forms. That is something which has been accepted for a long time as being a reasonable exception to make to help people making provision for retirement or death or other emergency. It is accepted as being a specially deserving category.
Other exceptions all come within the field of National Savings where encouragement is given to people who are prepared to lend to the Exchequer. Some of these exceptions are directed particularly at the small saver. The whole of the National Savings Movement and the Trustee Savings Banks, which form part of it, has a long history of arrangements by which the Government agree to give favourable terms and favourable taxation exemptions to people who lend to the Government. In particular, these arrangements help the small saver. This applies to the £15 exemption for interest at the Post Office Savings Bank and Trustee Savings Bank ordinary accounts.
I would remind the Committee that the whole question of tax relief on savings was considered by the Royal Commission which reported on it in its Final Report, Command Paper 9474. Its view was that strictly speaking no tax relief on savings was equitable in that it meant that two people with equal incomes and otherwise equal circumstances paid different amounts of tax according to how their incomes were disposed of.
I do not know whether it was this kind of consideration that the hon. Member for Somerset, North (Mr. Dean) had in mind when he asked me to dismiss from my mind the canons of taxation law. They are not something we can dismiss from our minds. It is a basic princple which we all know and accept, that if we are to have a taxation system which will be generally acceptable we have first to convince the taxpayer that we are

making it as fair and as equitable as we can. If two people find themselves receiving different taxation treatment by what seems to them arbitrary principles, we do not get that sense of justice.
I would apply this to the Liberal Party proposal that £200 of a person's income invested by his employer, or by himself if he were self-employed, in a particular type of bank account should be tax-free. Another person might be paying out £200 a year to buy his house. Although he might get some tax relief on the interest, he would not, in general, get any tax relief on the income out of which he makes the capital payment. There are many other forms of expenditure which are equally worthy, but which would not attract tax relief. The Royal Commission accepted that it was reasonable that there should be exceptions for life insurance.

Sir D. Glover: There is a fallacy in the argument that the Financial Secretary is putting to the Committee. A person buying a house is putting a claim on the resources of the nation whereas a person saving his money in Government stock of some sort is not putting a claim on the resources of the nation. Therefore, there is an argument that one is getting an advantage against the other.
If I might return to what my hon. Friend said, canon law was sacrosanct in this country until the trial of the seven bishops.

11.15 p.m.

Mr. MacDermot: We were talking not about the canon law, but about the canons of taxation law, a rather different thing.
Neither the Liberal Party's scheme nor any of the others which we are discussing on the new Clauses proposes to limit the exemption to cases where the moneys are lent to the Government. I agree with the hon. Member for Ormskirk (Sir D. Glover) to this extent, that this is a principle underlying the exemptions in respect of National Savings, the savings being in the form of money lent to the Exchequer.
I shall not go over the detail of new Clause No. 2, the Liberal Party's scheme. I should not adopt at this Box quite the terminology used by my hon. Friend the Member for Heywood and Royton (Mr. Barnett), but, with respect, it struck me


as being a rather ill-thought-out scheme. Among its obvious defects is the absence of any provision for the person whose employer refuses to co-operate in the scheme, a defect which does not, however, handicap the self-employed, who could benefit from it.
One of the main difficulties of the Liberal scheme is that, whereas benefits under pensions schemes are drawn in regular amounts and the taxpayer can see the pattern ahead, and is liable to pay tax on them as he withdraws them, other savings and investments are drawn out less regularly and, frequently, are drawn in large lump sums to meet some substantial item of expense, be it the purchase of a house, a motor car, or whatever it may be. Under this scheme, if the savings when withdrawn are to be taxed as income of the year of withdrawal, they might be liable to a very high rate of tax, perhaps even bringing the ordinary taxpayer into the Surtax class for that one year. I suppose that, in theory, one could work out provisions for spreading, but this would make the scheme even more complicated and administratively difficult than it is now.
Apart from problems of that kind, the essential difficulty is that the Clause favours only one of many different kinds of savings. If the Government were to concede it, they would very soon be obliged to give similar tax relief to many other people, and this would result in a considerable extra cost to the Revenue, without any assurance that the concession was resulting in any worth-while new savings rather than being, as I have said, a method of switching existing savings or for distributing earnings tax-free under the guise of savings.
The cost of the scheme is guesswork. It is anyone's guess how much advantage would be taken of it, but, to give a basis of calculation to hon. Members who may care to make their own guesses, if one were to assume that 1 million people took advantage of the scheme, that the deposits averaged £50 each, and that the taxpayers concerned would normally be liable to £10 tax on that, which is not a high rate, the immediate cost to the Exchequer would be £10 million for each £50 million saved. And query—How much of that would be in new savings?
In submitting new Clause No. 40, the hon. Member for Somerset, North began

modestly by saying that the Clause was not technically perfect. That is the understatement of the year. I do not think that the Clause can be taken seriously as a possible addition to this or any other Finance Bill, for it is, as drafted, no more than a declaration of intent—and we know of the criticisms made from the benches opposite about declarations of intent.

Mr. Dean: The hon. and learned Gentleman should address himself to the principle of it. I should be perfectly happy if he said that he accepted the clear principle behind the Clause and would bring forward his own draft on Report.

Mr. MacDermot: The hon. Gentleman had better wait for it. The Clause gives no definition of any kind of contractual insurance or savings schemes that are referred to and I thought that the hon. Gentleman's speech threw singularly little light on that. On the face of it, the scheme would include car or house insurance, or mortgage repayments. The Clause does not include any kind of limit on total allowable payments, such as applies to life assurance premiums.
But I shall not dwell on these matters, and shall assume that the sole purpose of the Clause was to provide a peg for a debate on the general subject of tax incentives for savings. We heard remarkably little from the hon. Gentleman on this subject as well. He made a very interesting and general speech which I thought was fairly characterised by his hon. Friend the Member for Ormskirk, who pointed out that he was continuing the debate we had on a Private Member's Motion last Friday. It was a very interesting debate and I thought that that was where we were again. But I had to strain to glean illumination from the speech about the intentions underlying the Clause.
As far as I could follow it, the hon. Gentleman's main suggestion was that, as was suggested last Friday, we should encourage the division of our health insurance into a sort of flat-rate basic system for everybody, with a graduated improved health service superimposed for those prepared to pay for it under an insurance scheme. What we learned today, and what seemed to be the Clause's chief intention, is that it is now proposed that the State should help subsidise superior


private health services by means of tax relief. That is an interesting idea, but it would not commend itself to the Government as a measure that we could support in the Finance Bill.
The scheme does, in its generality, overcome the criticism I made of the Liberal Party scheme of being one that would just benefit one particular form of savings, because it is so wide that its intention seems to be to grant tax relief to almost any kind of savings.
What reason is there to think that to do this would have any substantial effect on the level of savings? Certainly, it would have an enormous effect for the Exchequer. Whether the hon. Gentleman likes to call it "cost" or "loss of revenue", the loss to the Exchequer would be vast. It is anybody's guess how much it would be. That must depend on the scope of the schemes to which it is to be applied, and the total amount that is saved under them.
The same generality extends to the more modest proposal in new Clause No. 41. That is a proposal to extend to investment income generally the existing Income Tax exemption of the first £15 of an individual's interest on ordinary deposits in the Post Office Savings Bank and Trustee Savings Bank. That exemption represents interest at 2½ per cent. on a deposit of £600. This exception has for long been recognised as a special concession to these savings institutions within the National Savings Movement. To quote what has been said before about the reason for this, there are two main features involved:
First, that the rate of interest should be a static 2½ per cent., and that the money saved would pass directly to the Government. It would, therefore, assist the Government's monetary policy because more of the State's borrowing needs would be met without increasing the liquidity of the jont stock banks."—[OFFICIAL REPORT, 7th June. 1956; Vol. 553, c. 1437.]
That statement of principle might appeal to the hon. Member for Farnham (Mr. Maurice Macmillan) more than anything I would say, because it was the answer given by his father when Chancellor of the Exchequer in resisting claims of this kind.

Mr. Maurice Macmillan: I have never found that filial piety implied agreement

on economic policy. I have criticised previous Governments as much as this one. This system has been going on for a long time and that is why I want the hon. and learned Gentleman to alter it now.

Mr. MacDermot: But the hon. Gentleman must produce better arguments in favour of an alteration than the one he adduced tonight.
There is already a recognised exemption of £15 in this case, as I understand. There are special reasons for the exemption. It relates only to what is a guaranteed fixed low rate of interest on monies lent to the Government in a way which provides an elementary form of banking service for the investor at no charge to him. All these are circumstances which bear no relation to the claim of the proposed new Clause for a general exemption for all forms of investment income up to the £15 limit.

Mr. Maurice MacMillan: What the hon. and learned Gentleman is saying is that the low rate of 2½ per cent. is justified by a tax exemption which, of course, only benefits those who pay tax on higher levels and benefits most the Surtax payer. The smaller saver who pays no tax merely gets the disadvantage of 2½ per cent.

Mr. MacDermot: No. The small saver gets 2½ per cent. on moneys which he has lent through the facility of the Post Office Savings Bank and the Trustee Savings Banks. This is virtually the facility of a current bank account for which he pays no bank charges. He gets that facility to start with and gets a guaranteed fixed 2½ per cent. in addition, together with his capital guaranteed as well.
This is something which bears no relation, for example, to the position of a person who invests money, whatever it may be, in unit trusts or in company equity shares and for whom the hon. Gentleman proposes the £15 exemption should run. As I have said, the benefit of this and all these schemes would be the greater as one went up the scale. The higher a person's marginal rate of tax, the greater would be the benefit of any scheme of this kind.
The hon. Gentleman ended by inviting me to lend some encouragement to the thought that the Government had not turned their minds against any form of


tax relief for savings. All I can say to him is that, from, all the proposals and schemes we have considered—and he himself knows that the Government have had various proposals put to them about this—we do not as yet see our way to accepting any such proposal, for the reasons I have given at the outset.
We would need to be assured before we could support any such scheme that it really would attract new savings, that it would not merely result in switching and that the cost involved to the Exchequer would produce a return if not to the Exchequer then certainly to the economy which would justify the expenditure involved. Of course, in particular, we would be attracted by a scheme which would serve to extend the savings habit and encourage people to save who do not save at the moment.
These are the criteria by which we try to judge proposals of this kind, and I am afraid we have not yet found one which satisfies the criteria.

11.30 p.m.

Mr. Richard Wainwright: The Yorkshireman is familiar with the experience that to reach a very desirable destination he finds that he has to drive through miserable and depressing Lancashire drizzle.
I am sorry that the hon. Gentleman the Member for Ormskirk (Sir D. Glover) is not in his place. What an exhibition he put up. If my great grandfather had had the good fortune to invest £100 on the ground floor of Unilever I would not begrudge people the opportunity to do the same in modern circumstances.
The hon. Gentleman then produced the hoary old tale that the "boys" of I.C.I., when they get their annual share bonuses, rush to the stockbroker to get rid of them and "go on the loose". I know of no evidence at all that those who disinvest out of their I.C.I. shares do not use the money in a responsible fashion.
I have many constituents who work for I.C.I. in the dyestuffs division and who share in its annual distributions. My experience is that a number of them do take the view, which is a view that the Conservatives often urge upon us, that it is unwise to have large investments in the company for which one works and have, therefore, got out of their

shares at what they regard as a favourable moment and reinvested elsewhere.
I have personal evidence to that effect, and until somebody produces indications—and there has been none yet—that people are simply, on a large scale, turning their I.C.I. employees' shares into cash, and I shall not believe that particular story.
Then we have the hon. Member for Heywood and Royton (Mr. Barnett), with his abacus and his beads, protesting that he cannot add up these transactions and do the accountancy. He does great injustice to the splendid people he represents to suggest that news of the computer has not travelled as far as Heywood and Royton. There would be no difficulty at all, with the aid of the computers which the Inland Revenue is already using to some considerable tune, in conducting these particular transactions.
The hon. Member also parades the old Socialist idea, a modern version of the mercantilist theory, that there is a fixed fund of savings and that there is simply nothing we can do about it. Liberals repudiate this dreary doctrine entirely. Given sufficient incentives, and hope of protection against inflation, the volume of saving can be materially increased, and other countries have proved it.
The hon. Member for Farnham (Mr. Maurice Macmillan), who gave some tepid support to our new Clause, committed an indiscretion which is often noticeable when proposals on co-owner-ship are being discussed. He suggested—and it has been done before—that we want to shift the worker into management. Not at all. There is no evidence in any Liberal booklet on co-ownership that we want to interfere with management.
What we are saying—and it is a simple proposition—is that those workers—[HON. MEMBERS: "Young Liberals?"] I include young Liberals. We say that those workers who want to accept the responsibility of being shareholders should be encouraged to do so, and that those workers who prove themselves competent and can gain the confidence of their fellow workers should have an opportunity of taking part in the direction of industry, but not, under these schemes, in the management.
I come now to the observations of the Financial Secretary. He was eloquent


about the dangers and difficulties of giving special tax concessions to savings. With this I concur, but if so, why does his right hon. Friend the Chancellor come to the House two years in succession making some parade of increasing the opportunities for investment in National Savings certificates and other forms of national savings with tax advantages?
If the Government were to appear before us tonight saying that they went along with the Royal Commission in insisting that Income Tax should fall completely impartially on all forms of income, whether saved or not, one could respect their position; but when they continually widen a certain field of tax-free investment, it is inconsistent to object to our scheme on those grounds. They should be willing to admit to their Socialist supporters that every time the Chancellor of the Exchequer increases the opportunities for buying National Savings Certificates he is making a substantial hand-out to Surtax payers.
The Financial Secretary tried to excite our sympathy on behalf of the worker who would not be able to get his employer to co-operate in making use of the advantages which would flow from our Clause. What are trade unions for? Is this objection ever raised to the enormous tax advantages of pension schemes? It is quite open to a stubborn, obdurate employer to say, "No, I will resist the tax attractions of pension schemes. I will have nothing to do with them. I will stick in my last ditch and pretend that the tax advantages are not there." That choice is open to an employer, but no Government have ever said that on those grounds they would withdraw all the tax concessions—and they are many—which apply to pension schemes.
The rest of the Financial Secretary's objections, I regret to tell the Committee, were dredged up from the reply of a Conservative Chancellor of the Exchequer to just such a Liberal Clause which was debated in Committee in 1958, and particularly the extraordinary objection that under our scheme it would be possible for somebody who was unwise enough to withdraw a very large amount of savings in any one year to incur Surtax. Indeed, that would be possible.
If a taxpayer was foolish enough to time his withdrawals so that the whole lot fell in any one tax year, I would think that a little Surtax penalty was what he deserved for his folly. Any taxpayer who was not able so to arrange his withdrawals that some fell on 4th April and some on 6th April would not deserve very serious consideration from the House of Commons.
The Financial Secretary in concluding at least indicated that he did not have a completely closed mind on the subject. He said that he wanted evidence of a scheme attracting new savings. Let me put this proposal to him, although it does not affect the attitude that my hon. Friends and I will take in the Division Lobby tonight.
The Financial Secretary and his colleagues are now taking the country to some extent into a policy of financial regionalisation, as we discovered in the debates earlier today. Let him, therefore, try a scheme of this kind in one region of the country. Let him, for preference, take one of the more prolifigate regions where the record of thrift is not as high as it is in my own area. I will not offer him the name of any particular region, but let him go to a region where the rate of savings has been disappoining. Let the scheme be introduced on a regional basis, and my hon. Friends and I are quite prepared to abide by the results.
Meanwhile, we shall certainly divide in favour of our new clause when the time comes.

Sir W. Bromley-Davenport: I will not detain the Committee more than one minute, but I would like to take up the Financial Secretary on one statement which he made. He referred to the security to the small saver who put his money in the Post Office. I have never heard people talk such tripe.
Think of the man who buys a £1 National Savings Certificate, which matures after, say, five or six years. By the time it matures, owing to the depreciation of the and inflation it is worth less than when he bought it. So do not let us have any nonsense about the security of putting money into the Post Office. If, in a depreciating currency, a person, instead of putting his money in the Post Office, invests his money in equities, he


takes a risk, and may lose everything; on the other hand, he may double or treble his capital. But, after all, it was risk capital that made this country great.

Question put, That the Clause be read a Second time:—

The Committee divided: Ayes 124, Noes 178.

Division No. 366.]
AYES
[11.40 p.m.


Alison, Michael (Barkston Ash)
Glover, Sir Douglas
Nicholls, Sir Harmar


Astor, John
Gower, Raymond
Noble, Rt. Hn. Michael


Atkins, Humphrey (M't'n &amp; M'd'n)
Grant, Anthony
Osborn, John (Hallam)


Awdry, Daniel
Grant-Ferris, R.
Page, Graham (Crosby)


Beamish, Col. Sir Tufton
Gresham Cooke, R.
Pearson, Sir Frank (Clitheroe)


Bell, Ronald
Grieve, Percy
Pike, Miss Mervyn


Bennett, Sir Frederic (Torquay)
Grimond, Rt. Hn. J.
Pink, R. Bonner


Berry, Hn. Anthony
Gurden, Harold
Powell, Rt. Hn. J. Enoch


Bessell, Peter
Hall, John (Wycombe)
Prior, J. M. L.


Black, Sir Cyril
Hamilton, Michael (Salisbury)
Pym, Francis


Blaker, Peter
Harris, Reader (Heston)
Ramsden, Rt. Hn. James


Body, Richard
Harrison, Col. Sir Harwood (Eye)
Royle, Anthony


Boyd-Carpenter, Rt. Hn. John
Hawkins, Paul
Russell, Sir Ronald


Boyle, Rt. Hn. Sir Edward
Heseltine, Michael
Smith, John


Braine, Bernard
Higgins, Terence L.
Stainton, Keith


Brinton, Sir Tatton
Hiley, Joseph



Bromley-Davenport, Lt.-Col. Sir Walter
Hobson, Rt. Hn. Sir John
Steel, David (Roxburgh)


Brown, Sir Edward (Bath)
Holland, Philip
Stoddart-Scott, Col. Sir M. (Ripon)


Bryan, Paul
Hooson, Emlyn
Summers, Sir Spencer


Buchanan-Smith, Alick (Angus, N &amp; M)
Hunt, John
Taylor, Edward M. (G'gow, Cathcart)


Buck, Antony (Colchester)
Hutchison, Michael Clark
Taylor, Frank (Moss Side)


Carlisle, Mark
Jenkin, Patrick (Woodford)
Temple, John M.


Clegg, Walter
Jopling, Michael
Thatcher, Mrs. Margaret


Cooke, Robert
Kimball, Marcus
Thorpe, Rt. Hn. Jeremy


Curdle, John
King, Evelyn (Dorset, S.)
Tilney, John


Corfield, F. V.
Kitson, Timothy
Turton, Rt. Hn. R. H.


Costain, A. P.
Lancaster, Col. C. G.
van Straubenzee, W. R.


Crowder, F. P.
Lloyd, Ian (P'tsm'th, Langstone)
Vaughan-Morgan, Rt. Hn. Sir John


Dance, James
Lubbock, Eric
Wainwright, Richard (Coins Valley)


Davidson, James(Aberdeenshire, W.)
Mackenzie, Alasdair (Ross &amp; Crom'ty)
Ward, Dame Irene


Dean, Paul (Somerset, N.)
Maclean, Sir Fitzroy
Weatherill, Bernard


Deedes, Rn. Hn. W. F. (Ashford)
Macleod, Rt. Hn. Iain
Webster, David


Doughty, Charles
Macmillan, Maurice (Farnham)
White law, Rt. Hn. William


Eden, Sir John
Maginnis, John E.
Wilson, Geoffrey (Truro)


Elliott, R.W. (N'c'tle-upon-Tyne, N.)
Maude, Angus
Wolrige-Gordon, Patrick


Errington, Sir Eric
Maxwell-Hyslop, R. J.
Wood, Rt. Hn. Richard


Eyre, Reginald
Maydon, Lt-Cmdr. S. L. C.
Worsley, Marcus


Farr, John
Miscampbell, Norman
Wright, Esmond


Fletcher-Cooke, Charles
Monro, Hector
Wylie, N. R.


Fortescue, Tim
More, Jasper



Foster, Sir John
Morgan, Geraint (Denbigh)
TELLERS FOR THE AYES:


Gilmour, Ian (Norfolk, C.)
Morrison, Charles (Devizes)
Dr. M. P. Winstanley and


Gilmour, Sir John (Fife, E.)
Murton, Oscar
Mr. Russell Johnston.




NOES


Allaun, Frank (Salford, E.)
Crossman, Rt. Hn. Richard
Fraser, Rt. Hn. Tom (Hamilton)


Allen, Scholefield
Cullen, Mrs. Alice
Galpern, Sir Myer


Anderson, Donald
Dalyell, Tam
Gardner, Tony


Archer, Peter
Davidson, Arthur (Accrington)
Ginsburg, David


Armstrong, Ernest
Davies, Dr. Ernest (Stretford)
Gordon Walker, Rt. Hn. P. C.


Atkinson, Norman (Tottenham)
Davies, G. Elfed (Rhondda, E.)
Gray, Dr. Hugh (Yarmouth)


Bacon, Rt. Hn. Alice
Davies, Ednyfed Hudson (Conway)
Gregory, Arnold


Barrett, Joel
Davies, Ifor (Gower)
Grey, Charles (Durham)


Baxter, William
de Freitas, Rt. Hn. Sir Geoffrey
Griffiths, David (Rother Valley)


Bennett, James (G'gow, Bridgeton)
Delargy, Hugh
Hamilton, James (Bothwell)


Bishop, E. S.
Dell, Edmund
Hamling, William


Blackburn, F.
Dempsey, James
Hannan, William


Booth, Albert
Dewar, Donald
Harper, Joseph


Bottomley, Rt. Hn. Arthur
Diamond, Rt. Hn. John
Haseldine, Norman


Boyden, James
Dobson, Ray
Hazell, Bert


Braddock, Mrs. E. M.
Doig, Peter
Hooley, Frank


Bray, Dr. Jeremy
Dunn, James A.
Horner, John


Brooks, Edwin
Dunnett, Jack
Houghton, Rt. Hn. Douglas


Brown, Hugh D. (G'gow, Provan)
Dunwoody, Dr. John (F'th &amp; C'b'e)
Howarth, Harry (Wellingborough)


Brown, Bob (N'c'tle-upon-Tyne, W.)
Ellis, John
Howarth, Robert (Bolton, E.)


Buchan, Norman
English, Michael
Howell, Denis (Small Heath)


Callaghan, Rt. Hn. James
Ensor, David
Howie, W.


Cant, R. B.
Faulds, Andrew
Hoy, James


Carmichael, Neil
Fernyhough, E.
Huckfield, L.


Coe, Denis
Fletcher, Ted (Darlington)
Hughes, Roy (Newport)


Coleman, Donald
Foot, Michael (Ebbw Vale)
Hynd, John


Conlan, Bernard
Ford, Ben
Irvine, A. J. (Edge Hill)


Crawshaw, Richard
Forrester, John
Jackson, Colin (B'h'se &amp; Spenb'gh)


Crosland, Rt. Hn. Anthony
Fowler, Gerry
Johnson, James (K'ston-on-Hull, W.)




Jones, J. Idwal (Wrexham)
Morris, Alfred (Wythenshawe)
Silverman, Julius (Aston)


Jones, T. Alec (Rhondda, West)
Moyle, Roland
Small, William


Kelley, Richard
Newens, Stan
Snow, Julian


Kerr, Dr. David (W'worth, Central)
Oakes, Gordon
Steele, Thomas (Dunbartonshire, W.)


Leadbitter, Ted
Ogden, Eric
Stonehouse, John


Ledger, Ron
O'Malley, Brian
Thomas, George (Cardiff, W.)


Lee, John (Reading)
Orbach, Maurice
Thornton, Ernest


Lever, L. M. (Ardwick)
Orme, Stanley
Tinn, James


Lewis, Arthur (W. Ham, N.)
Oswald, Thomas
Urwin, T. W.


Lewis, Ron (Carlisle)
Owen, Dr. David (Plymouth, S'tn)
Varley, Eric G.


Lomas, Kenneth




Lyon, Alexander w. (York)
Owen, Will (Morpeth)
Wainwright, Edwin (Dearne Valley)


Lyons, Edward (Bradford, E.)
Page, Derek (King's Lynn)
Walden, Brian (All Saints)


McBride, Neil
Palmer, Arthur
Walker, Harold (Doncaster)


McCann, John
Parkyn, Brian (Bedford)
Watkins, David (Consett)


MacDermot, Niall
Pavitt, Laurence
Watkins, Tudor (Brecon &amp; Radnor)


Macdonald, A. H.
Pentland, Norman
Well beloved, James


McGuire, Michael
Prentice, Rt. Hn. R. E.
Wells, William (Walsall, N.)


Mackenzie, Gregor (Rutherglen)
Price, William (Rugby)
Whitaker, Ben


Mackintosh, John P.
Probert, Arthur
Whitlock, William


Maclennan, Robert
Rees, Merlyn
Williams, Alan (Swansea, W.)


McNamara, C. Kevin
Rhodes, Geoffrey
Williams, Clifford (Abertillery)


Mahon, Peter (Preston, S.)
Roberts, Goronwy (Caernarvon)
Williams, Mrs. Shirley (Hitchin)


Marion, Simon (Bootle)
Robinson, W. O. J. (Walth'stow, E.)
Wilson, William (Coventry, S.)


Mallalieu, E. L. (Brigg)
Rose, Paul
Winnick, David


Manuel, Archie
Ross, Rt. Hn. William
Winterbottom, R. E.


Mapp, Charles
Rowland, Christopher (Meriden)
Woodburn, Rt. Hn. A.


Maxwell, Robert
Rowlands, E. (Cardiff, N.)
Woof, Robert


Mendelson, J. J.
Sheldon, Robert
Yates, Victor


Millan, Bruce
Shore, Peter (Stepney)



Miller, Dr. M. S.
Short, Rt. Hn. Edward (N'c'tle-u-Tyne)
TELLERS FOR THE NOES:


Morgan, Elystan (Cardiganshire)
Silkin, Rt. Hn. John (Deptford)
Mr. Walter Harrison and




Mr. Charles R. Morris.

Mr. Iain Macleod: I beg to move,
That the Chairman do report Progress and ask leave to sit again.
This is an obvious natural break. The next Clause concerns tax relief for the blind. It is one to which we attach great importance, and we would like to start the day with it. If the Chancellor is willing, I suggest that we stop now.

Mr. Diamond: I have no hesitation in agreeing with the first part of the right hon. Gentleman's statement. It is a suit-

able time at which to end our labours. We have not, numerically, made an enormous amount of progress, but I recognise that the new Clauses that we have been discussing are substantial ones, and I feel sure that the Committee will want to make perhaps even more rapid progress tomorrow. In that spirit, I assent to the right hon. Gentleman's Motion.

Question put and agreed to.

Committee report Progress: to sit again Tomorrow.

HEALTH CHECK WEEKS

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Walter Harrison.]

11.52 p.m.

Mrs. Joyce Butler: In the present organisation of the National Health Service, emphasis is placed primarily on diagnosis and treatment in medical care, while less attention is paid to prevention, after-care and rehabilitation. Although primary prevention is the ideal to be aimed at, it is limited by lack of finance and knowledge of preventive procedure. Only quite recently the Office of Health Economics has reminded us how little we know about the effects of nutrition upon health.
Last week the Minister of Transport reminded us that the medical assessments of the dangers of exhaust fumes are by no means known. Therefore, with so many uncertainties in the sphere of preventive medicine, early diagnosis has rather special merit, in that it makes treatment available earlier on the time-scale of the disease developing.
We are familar with mass radiography units, which are universally used throughout the country and widely accepted. These give early warning of possible lung disease such as, tuberculosis. Similarly, we have in recent years seen a great development in clinics for cervical cytology. These clinics, which have been established in various parts of the country, are interesting in that they have grown very rapidly.
There are still variations between one region and another, and it may be possible for the Parliamentary Secretary, in replying to this debate, to say a word about these regional variations. The interesting thing is that the Minister of Health has sent a circular to local authorities reminding them of the importance of establishing these clinics. The clinics established for cervical cytology have in many cases gone on to take tests for the prevention of breast cancer, and in some cases diabetes and other diseases. This is one aspect of early warning which is taking place.
The other aspect is in the sphere of education and research, where the findings with regard to the dangers of tobacco smoking in relation to lung cancer are

well known. Less well-known, but equally important, is the work which has been done on bladder cancer in the rubber industry and asbestosis and lung cancer in industries associated with asbestos. I mention these because they are all fields of early diagnosis, and in a sense preventive medicine, which have had a tremendously important effect on the greatest scourge of health at the present, the spectre of cancer, and a fact which I think should be more widely known than it is is that largely because of early detection and early treatment 30,000 cases of cancer are cured every year.
It is not only tuberculosis and cancer which can be prevented by early warning devices of this kind. Other diseases can be detected, and a very interesting experiment was begun in Rotherham in 1962 when attempts were first made to introduce diabetes diagnosis at the same time as the mass X-rays took place. Every year since then the service has been available for short periods, and further techniques have been added each year.
In the autumn of 1966, in nine days 5,763 people took an average of five tests from the 11 that were available. Of those attending, women predominated in the ratio of 2 to 1, but the failure rate was twice as high for men as for women. The individual tests were for anaemia, chest X-ray, diabetes, vision, glaucoma, hearing, artery, heart, and lung function, cervical cytology, breast cancer, and mental health. More than 1,000 failed at least one test, and one man in four and one woman in seven, were found to have hidden illnesses.
The list of cases found makes very interesting reading, because there were 300 cases of suspected diabetes, 18 men needed urgent attention for hypertension, five had active tuberculosis, two women had cervical cancer, 128 had diseases of the chest, and 50 women were referred for further breast checks. Of the 1,825 people who took a mental health test, 486 had some degree of mental trouble, one in 16 women, and one in 15 men.
A further interesting point is that the cost of this service is about 10s. per test, which is very reasonable. The medical officer of health for Rotherham stresses the importance of adequate mechanism for follow-up, and he also stresses the


importance of co-operation between the three sections of the service, that is, the local medical officer of health department, the hospital service, and the general practitioner. He calls it "making a slight dent in the problem of early diagnosis and preventive medicine", but the public response indicates that it is very much more than a slight dent. It seems to be something of a new wind blowing through the Health Service. The public response has been quite amazing.
I have spoken to the hon. Member for Rotherham (Mr. O'Malley) and to other hon. Members who were at Rotherham when these clinics were held. They were quite staggered to see the queues of people who went there. They did so quite informally and this is one of the great things about the Rotherham scheme. People do not have to make appointments to attend. It is all very informal. Their fears are brought into the open, and they are able to have something done about them; they are able to have something done about their hidden fears.
One of the problems about cervical cytology has been in persuading the public to accept the procedures when they have been available, but there was no problem in persuading members of the public to accept mass screening in the Rotherham experiment. There has been action elsewhere, and in Epsom an experimental scheme was run for ten days in September last year, with about five thousand attendances, fewer than a thousand of those being from men, pro-ably because the idea had got around that the tests were for women only. Some women waited for six hours to take a test.
There has been screening for breast cancer, diabetes, cervical smears and other diseases in some clinics, and at Epsom, eleven months' planning was involved. The cost for the five thousand was about £1,500.
Salford has been running multi-clinics for ten years, and last year, 3,753 patients attended over a six weeks period for tests which included vision, hearing, diabetes, anaemia, chest, and cervical smears, and the cost amounted only to 3s. in the £ rate. In Bedford, and Chester-le-Street, consideration is being

given to similar multi-clinics, and in Darlington there has been a screening clinic and they are considering there what further steps can be taken.
There has been a great surge of interest in the Press and among members of the public since details of the Rotherham scheme were published, and it interested people so much that more and more they are asking, "Why cannot we have something similar in our area?"
The Minister has so far refused by means of question and answer in the House to do anything, but could the Parliamentary Secretary tonight say that he will give a little more thought and consideration to the kind of facts which I have produced and to other information which is available? There have been special "weeks" and mass screening tests have been carried out and information has been sent to local medical officers of health asking them to consider staging something similar in their own areas wherever it might be practical to encourage them to do so. It has been done with cervical screening and, as the Parliamentary Secretary knows, there is tremendous variation between one area and another in what is done. The Medical Officer of Health of Darlington talks of future action which will emerge from the screening tests carried out in his area.
It is not only the results which are produced from the holding of these "weeks" in the bringing forward of cases and the giving of treatment which is appropriate, but there is also the possibility of developing a further measure of preventive medicine in the health service. We can learn from the varied experiences; ideas are formed, and there are lines of development for future work; and the cost of it all is comparatively small. The Kaiser Foundation Clinic in California estimates a cost of £9 per patient, and has computers linked with four experimental centres in different parts of the United States, so important do the Americans consider this type of preventive medical work. It is not desirable that the Minister should think in such terms, but it is important that all medical officers of health in different parts of this country should think in terms of something of the kind of which I have spoken tonight.
Therefore, I urge him to reconsider this question. I know that he is concerned about the manpower difficulties, but I am assured by the medical officers of Rotherham and other places that, when the staff are keen, they will put in the extra time and effort for a week or ten days and the follow-up and that this can be done out of limited resources. Our limited resources of general practitioners and hospitals will not permit mass preventive medicine, but short sharp courses along the lines of Rotherham's are possible.
I therefore ask him to look at this again, and, if he cannot give an answer tonight, perhaps he would put it to the Minister again to see whether some circular on these lines can be sent to medical officers of health.

12.6 a.m.

The Parliamentary Secretary to the Ministry of Health (Mr. Julian Snow): The House is indebted to my hon. Friend the Member for Wood Green (Mrs. Joyce Butler) for raising this important matter, and if I cannot give the assurance which she would like about the circular tonight she will know that the debate will be examined by the various authorities. My right hon. Friend has devoted a great deal of attention to these check weeks and no doubt will be formulating a thorough policy which will take account of her points.
I am glad of the opportunity to explain why we are not encouraging all local authorities to follow the example of Rotherham and others. It is not because we underrate the importance of preventive medicine: that is a misconception. On the contrary, we believe that specialist weeks may be effective for health checks and we approve of the enterprise of Rotherham and other authorities.
My right hon. Friend has been advised by his Standing Medical Advisory Committee that screening of the general public should be undertaken only for conditions which can be clearly diagnosed and for which effective treatment is available. We accepted this advice and are working in this framework.
Satisfactory screening tests exist for only a limited number of conditions. A number of requirements has to be met before general screening for a particular disease can be recommended. The disease must, first, have a recognisable

latent or early symptomatic stage. Second, the test must be reliable and capable of being applied widely and efficiently. Rotherham's medical officer of health himself has described many of these tests as fairly blunt instruments.
Second, it is no use having tests which fail to detect people who have the condition, as they may then be lulled into a false sense of security, or an inaccurate one, since many patients will then have to undergo further full-scale examinations or may be treated unnecessarily. The efficiency of the available tests varies; some are more reliable than others. Third, we have to be satisfied that further treatment will prevent or alleviate the disease.
In the light of this situation, our advisers have considered the present screening tests for various diseases. Certain methods are fully accepted and have been in use for many years. Mass radiography for the detection of tuberculosis and other chest diseases is probably the best-known example. Even here, however, experience has shown that best results come from concentrating on certain groups known to be vulnerable rather than routine screening at regular intervals of the public as a whole.
Screening tests are widely used in the maternity and child welfare services. Mothers are screened at ante-natal and post-natal clinics for a wide range of conditions. Young babies are screened for phenylketonuria, hearing defects and other congenital abnormalities. Older children are examined by the school health services.
During the last two or three years exfoliative cytology for cervical cancer has been accepted, on the advice of the Standing Medical Advisory Committee, as a test which should be offered to all women at risk. My hon. Friend knows of the progress that has been made in this sphere, and I pay tribute to her for her work in this matter. As a result of her work and the work of others, the public consciousness has been alerted to the need to provide an overall service.
We keep in close touch with scientific developments in this field. For several years we have taken the initiative, in collaboration with the Medical Research Council, in arranging research to establish the value of screening for various


diseases. We are financing a large number of special studies and will continue to encourage studies wherever these seem likely to produce useful results.
When the medical requirements have been satisfied, we have also to be satisfied that the diagnostic facilities and facilities for treatment will be readily available to all those who have been offered the tests. My hon. Friend is well aware that when we first started the smear-taking service for cervical cancer it had to be restricted to certain groups of women because of the shortage of laboratory space and of technicians to examine the smears, but these shortages are now being overcome and more and more local authorities are able to offer the test to women of all ages.
Screening for cervical cancer is, in fact, a good example of a well-validated testing procedure which can throw up cases for early and effective treatment. It is a service to which, as my hon. Friend knows, my right hon. Friend attaches great importance. It has grown at a rapid rate. The figures for 31st December, 1966, are available and they show that the annual rate of screening in England and Wales was over 1,350,000 tests, an increase of 11 per cent. over the figure for six months previously.
Progress, therefore, continues to be good. There are, of course, variations between regions and between areas within the regions. The rate of development depends on many interlocking and local factors. We are, however, keeping a careful watch on the situation and encouraging progress in the less well-served areas. I hope my hon. Friend will accept that my right hon. Friend and I are both keenly interest in this subject, but I do not want to go into this in too much detail tonight because cervical screening is only one of the subjects germane to this debate.
Checking on people's health is, therefore, a routine in the maternity and child welfare services, in the mass miniature radiography service and in the cervical cytology service. Some local authorities also organise testing for diabetes and breast cancer or run health clinics of an advisory nature for the elderly. The special feature of Rotherham is that it organises its screening services around a week or fortnight instead

of throughout the year. There are advantages and disadvantages in this course.
One particular drawback of organising the screening in one intensive period is that a load is suddenly thrown on the hospital and general practitioner services. Another drawback is that it is impossible, in the period of one or two weeks each year, to make available a screening service for all people at risk. Such screening weeks have long been tried in other countries, and my hon. Friend mentioned the Kaiser scheme in America, but emphasis is now being laid on regular services for conditions where the worth is considered proved.
One of the studies which we are undertaking is research into the organisation of screeening through general practice. We are investigating whether patients in a group practice can be invited by their own doctors to attend for a number of screening examinations, at the end of which their results will be reviewed by their own doctors. This is not to play down the valuable and necessary work of local authorities, but we are not satisfied that all screening should be carried out through the public health service.
For these reasons also, research workers from our Social Science Research Unit attended the last clinic at Rotherham to carry out studies into the socioeconomic aspects. They sought to find out what kind of people came to the clinic, and whether they were or were not a typical cross-section of the population; what motivated them in choosing to attend, and what it cost them in time and effort. The unit also set out to assess some of the direct clinic costs in terms of the professional times and skills that were used. The data from this research will, we hope, supplement the report from the medical officer of health and, when analysed in conjunction with it, should enable us to make a tentative step towards an evaluation of these weeks.
We are most interested in the work that is being done at Rotherham, and the way it is organised. Medical and other officers from the Department have gone to Rotherham to see the clinics, and have been in constant touch with Dr. Donaldson, the Medical Officer of Health. In February of this year, my right hon. Friend saw my hon. Friend


the Member for Rotherham (Mr. O'Malley) and officers and representatives of the council to discuss the whole problem. We should like to pay tribute to the energy and enthusiasm of the organisers concerned.
Rotherham has been running health weeks for four years. At the first week, in November, 1963, two tests only were offered—chest X-ray for tuberculosis, and diabetes. In 1964, there were additional tests for anaemia, cervical cancer and hearing. By 1965, the week had been extended to a fortnight, and tests added for glaucoma, breast cancer, lung functions and vision. Last year, the clinic ran also for a fortnight and had 11 tests, the extra two being the examination of blood pressure and a questionnaire for mental illness.
During all of these weeks, the local authority has worked in very close cooperation with the local general medical practitioners and with the Sheffield Regional Hospital Board. This is of the utmost importance because of the work which will be thrown on the hospital laboratories and out-patient departments, and on the general practitioners in following up cases.
There is, perhaps, one point worth making here. Although at Rotherham 11 different tests were offered, not all of them were undergone by all who presented themselves. Indeed, I understand that the choice whether to have each test offered was left to the individual patient. That seems to me right and proper; one cannot compel people to have these tests. But it does mean that a patient who presented himself might choose in ignorance not to have a test which, in fact, he ought to have.
At the moment, we are awaiting a report from the Medical Officer of Health on the recent results. We are aware that

reports have appeared in the Press about this year's findings, but these were preliminary findings only. Since the Medical Officer of Health's report, which will contain his commentary on and discussion of the figures, has yet to be published I do not think that it is right to comment at this state on the results which have appeared. We have them in the Ministry, and are studying them closely in conjunction with our own research.
Let me sum up our position. We are advised, and we agree, that screening of the general public should be undertaken only for conditions which can be clearly and accurately diagnosed, and except in these circumstances screening of the general public can do harm and is, in any case, a wasteful use of resources both local and national. For this reason, I am not convinced on present evidence that this method of detecting disease should be recommended to health authorities generally. We are, however, most interested in the work that is being done by local authorities in this field and are following it closely.
In all that I have said, I emphasise most strongly that nothing should be construed as being in any way a criticism of what has been done over the last few years at Rotherham; that nothing should be construed as casting any doubt upon the validity of the results they are obtaining. All that is in our mind, as I have explained in some detail, is the doubt whether, taking account of the sudden burdens thrown on the analytical and treatment services, we are in a position with great conviction to recommend to authorities generally weeks such as have been discussed and mentioned by my hon. Friend.

Question put and agreed to.

Adjourned accordingly at nineteen minutes past Twelve o'clock.